Insurers explore potential gains in offshore venture

By NIKE POPOOLA

As at the last count, 10 indigenous insurance companies have expanded their operations into other parts of Africa. This is in spite of the fact that they have not been able to deepen penetration at home. Moments after the Federal Government induced consolidation about two years ago, the various operators promised to take advantage of the country‘s population by creating various attractive products.

Within a short while, efforts along this line have been truncated as some of the operators have either shelved the idea or completely forgotten about it. The reason for this is not far-fetched as insurance is still regarded as an alien culture in the Nigerian society.

However, to ensure the gains of their investments and for the purpose of sustainability, Nigerian insurers are being driven by a common wind to explore business opportunities in other African countries. The lowly take-off of the offshore venture, which started with a bold step by Continental Reinsurance Plc, when it moved into Cameroun and some other francophone countries, as well as Industrial and General Insurance Limited venture into Uganda, has today become an attraction to other operators. Setting up a branch outside the country, no matter how small the office is, has not only become a big addendum to their credentials, but also an event to be celebrated.

Apart from the financial gains in these expansions, it has also enhanced more economic ties among the countries, thus strengthening their relationships.

Some companies that have so far launched out include Intercontinental Wapic Insurance Plc, Equity Assurance Plc, Regency Alliance Insurance Plc and International Energy Insurance Plc. They all have branches in Ghana.

Others are Mutual Benefits Assurance Plc and Capital Express Company Limited, which ventured into Liberia, while Staco Insurance Plc opened shores in Sierra Leone.

As the rush persists, experts have canvassed the need for organisations to conduct proper feasibility studies before exploring the markets in order not to jeopardise the reasons for the exploration.

It is worthy of note that insurance works by the law of large numbers, by ensuring the pool of funds huge enough to meet claims obligation and also provide spare cash for both short and long term investment from which the insurer profits.

A clear look at most of the African countries ventured into shows that they have less population and low level of economic activities compared to Nigeria. This, however, raises doubts on the wisdom behind such investments.

Operators, have contended the need for genuine expansion and profiteering are some of the factors that push them.

According to them, a major factor is the reception of the indigenes to insurance as compared to what obtains in the Nigerian society.

They said that due to the low penetration of insurance in Nigeria, countries with smaller population in Africa but higher penetration have been rated as better players in international insurance business.

For instance, South Africa, with a population of just about 47.9 million, has an insurance penetration of 14.7 per cent and contributes about 70 per cent of the entire insurance business on the African continent.

Kenya, with a penetration level of 2.8 per cent has a population of 38 million, and statistics reveal that its life assurance market is stronger than Nigerian insurance business.

Namibia, with a population of 2.1 million, has 8.7 per cent penetration while Nigeria, with population of over 140 million has a low penetration level of less than one per cent, which has ranked it among the lowest in the African market.

According to the industry players, the West African region has less course of insurance market as compared to Nigeria, and the market also, not as aggressive as what obtains in the local economy.

They, however, said that the ability to stretch beyond the limit was available in these countries but that the operators there were not exploring the potential.

Because of the resources largely untapped in those economies, the insurers believe if the kind of aggression in Nigeria is applied in such areas, they stand to gain a lot of untapped income within a matter of time.

They also contend that since the world is becoming a global village, then, hardly will any big organisation not want to be virtually everywhere it can conquer.

One major confidence they have shown in such economies is that just like Nigeria is growing, those economies are also growing and will definitely not remain stagnant.

The Managing Director, Mutual Benefits Assurance Plc, Mr. Akin Ogunbiyi, pointed that the emergence of the presence of Nigerian insurance companies in the neighbouring countries was part of its leadership impact in such regions.

He said that there was no basis for comparison between the Nigerian insurance industry and those of other countries in the West African region.

According to him, the Nigerian insurance industry is the most dynamic, the most vibrant and the most professional that you can find within the sub-Saharan African countries.

He said that the country had the professionals in man power, the capitalisation, the capacity in terms of IT, and that in the area of international exposure, Nigeria‘s insurance industry was far ahead.

For this reason, he adds that the key players in the Nigerian market were actually looking out.

According to him, the intention is to promote a regional, viable, vibrant, dynamic and professional regional insurance industry.

For instance, he cited that Liberia just came out of war and had an emerging market.

He noted that there had actually been clamour by the government and people of Liberia to partner in its economic revival and that because Nigeria saw them through the war, the country would also see them through the economic revival and rebirth.

He said Mutual Benefits would not only partake in making the insurance market in Liberia very vibrant and conducive, but would also assist the economy, most especially, the insurance sector.

To the Managing Director, Intercontinental Wapic Insuance (Ghana) Limited, Mr. Rasaq Abiodun, an environment that is conducive for business activities with basic amenities will attract investors.

While citing the Ghanaian environment as an example, he noted that one of the strong points of the economy was the sincerity of purpose among the average Ghanaian insuring public and the Ghanaian people generally.

Insurance, he said, is a conceptual business between two willing parties and that sincerity is necessary in transacting business.

He said the industry was one that had sincere people where they knew one another.

For this reason, he believes that one of the best places you can find that practice is in this Republic of Ghana which could make the needed impact for both the insurer and the insured.

Abiodun, however, noted that the Ghanaian insurance market was not large compared to what we have in Nigeria but that it was a market with potential.

According to the managing director, International Energy Insurance Plc, Mr. Jacob Erhabor, inasmuch as the Nigerian insurers are worried about the level of insurance penetration in the country because of the huge population available, statistics also revealed that many of such African countries have higher insurance penetration.

He, however, said that higher population in those countries would have been an added advantage.

Erhabor emphasised the need for any company to conduct proper feasibility study before going anywhere.

To him, in this age and time when everybody is talking about globalisation, there is the need to venture out and have the needed experience. At the end of the day, he noted, firms would be broadening their businesses and have diverse portfolios.

He noted that many European countries were equally leaving their countries and coming to Africa to do business, adding that it was a calculated risk because one must know why he is going out and not just branching out because others are trading offshore.

According to him, to venture offshore, a firm must have the resources, both human, capital and other necessities to support the expansion, otherwise, at the end of the day, such venture might not really be worth it.