Home > Breaking news > Forex Scarcity Stifling Insurance Operations, NIA, CIIN Lament

Forex Scarcity Stifling Insurance Operations, NIA, CIIN Lament

Minimum capital for composite firms down to $16.13m from $25.12m

Even as insurance practitioners are complaining about the prevailing apathy by the public towards its services, operators have lamented the negative effects of the foreign exchange crisis confronting the nation on their businesses.

The operators under the aegis of the Nigeria Insurers Association (NIA), and the Chartered Insurance Institute of Nigeria (CIIN), noted that the devaluation of the Naira has wiped off the value of their capital base and insurance stock price.

Currently, the official exchange of the Naira per dollar is N305.00 while that of the parallel market (black market) hovers between N400 and N420 per dollar.
The Chairman of NIA, Mr. Eddie Efekoha, and the Deputy President of the CIIN, Mrs. Funmi Babington-Ashaye, spoke at different fora on the plight of the insurance sector in the face of the protracted foreign exchange crisis.

Speaking on the challenges of the sector at a recent Insurance Professionals Forum, held in Abeokuta, Ogun State, Efekoha noted that the sector cannot be isolated from the effects of developments in the nation’s economy, adding that the underwriting ability of the sector is proportional to the financial stability of the economy.
Citing statistics to compare what obtained in the past and the current developments, he maintained that the weakness of the Naira among other foreign currencies has drastically reduced the industry’s financial strength and competence to handle certain businesses.

While reeling out statistics between 2015 and 2016, Efekoha said:  “In 2015, the N2 billion minimum capital base for life underwriting firms was the equivalent of S10,050,251.26 whereas in 2016, it has come down to $6,451,612.90.

“Non-life insurance minimum capital of N3 billion in 2015, was the equivalent as $15,075,376.88, whereas in 2016, it came down to $9,677,419.35, Composite insurance firms with N5 billion minimum capital in 2015, or $25,125,628.14 was drastically reduced to $16,129,032.26 in 2016. While Reinsurance firms with N10 billion minimum capital in 2015, or $50,251,256.28 but came down to $32,255,064.52 in 2016.

“This obviously has put local underwriting firm at a disadvantaged position when it comes to underwriting dollar denominated accounts and other businesses that require foreign technical assistance.”

Apart from the foreign exchange crisis affecting hindering growth of the sector and its contribution to the nation’s Gross Domestic Products, the NIA Chairman enumerated other problems of the economy which has direct negative consequences on the insurance sector.

These include the security situation in the North East and South South, current slump in the global price of crude oil and crude oil over-supply, scarcity of petroleum products, depletion of the nation’s external reserves, rationing of forex amongst eligible applicants, inconsistent economic policies and volatile capital market operations.

On her part while responding to the impact of the financial crisis and foreign exchange scarcity on insurance business, in Lagos, the Deputy President of the CIIN, Mrs. Funmi Babington-Ashaye, maintained that operators are finding it difficult to pay premiums to their foreign reinsurers (partners) whom they ceded substantial part of big accounts like oil and gas, aviation, among others.

According to Mrs. Babington Ashaye, “When you talk of large risk, i.e., oil and gas, aviation, very small proportion are being kept in this market and close to about 80 per cent to 90 per cent are being ceded abroad and if there is no foreign exchange in the country for them to cede, you can imagine what they are sitting on. They are actually sitting on a keg of gun powder that can explode anytime.”

Further, she said: “It is very clear that inflation is very high and the country is actually on the brink of recession. Clearly, it’s only when you have a lot of money to spend that you remember insurance, even for corporate organisations. They have a lot of issues regarding their bottom line. Prices have gone up and you see some of them that are even insuring in the past, comprehensively, have started insuring third party, even some individuals not renewing at all. You can imagine the negative impact on the bottom line of insurance firms.

About Editor

Otunba Sayo Akintola is a 1992 graduate of Linguistics from the University of Ibadan, Oyo State. He holds a post-graduate diploma in Financial Management and MBA from Abubakar Tafawa Balewa University, Bauchi. He started his 12-year sojourn in journalism at the Nigerian Tribune in 1993 as Business and Economy reporter. He rose through the ranks to become the Group Business Editor of the nation’s oldest surviving private national newspaper, the Nigerian Tribune. He set up World Street Journal magazine in 2018.

Leave a Reply

Your email address will not be published. Required fields are marked *


This site uses Akismet to reduce spam. Learn how your comment data is processed.


Check Also

President Buhari Signs N21.8 trillion 2023 Budget Into Law

PRESIDENT Muhammadu Buhari has today signed the 2023 Appropriation Bill of N21.8 trillion into law ...

Nigeria’s Inflation Rises To 21% Amid High Import Cost, Soaring Food Prices

The consumer price index (CPI), which measures the rate of change in prices of goods ...