Ifeanyi Ugwuadu
7 April 2004
Faced with increasing capacity cut and limits imposed on Nigerian risks by foreign reinsurers, insurers are not comfortable with the current level of capacity provided by the local reinsurers and have therefore advocated mergers of the existing ones.
Chairman of insurance industry's Rating Committee, Mr Rowland Madiebo said the local reinsurance companies have to re-engineer their businesses to cope with the changing risk-protection needs of the primary insurers who sometimes have to contend with adverse business decisions of overseas reinsurers when the country's insurers make too much claim.
Madiebo believed that the economy needs additional local reinsurance capacity to absorb the growing needs of buyers of insurance, stressing that reinsurance growth in the country has not kept pace with insurance growth. This, he said, has compelled insurers to look for certain back-up overseas.
He maintained that if the local reinsurers could develop treaty plans that is capable of responding to the needs of insurers on some of their exposures, the search for reinsurance programs abroad could be reduced pointing that a company like Nigeria Re could use its expertise to engineer broad-based programs that can attract the reinsurance requirements of big multinationals.
The Inter-continental Assurance boss noted that the industry needs a strong insurance market that will further improve capacity and retention observing that the current level of reinsurance available is not adequate for the needs of local operators. "The industry needs a strong reinsurance market despite the privatisation of Nigeria Re," the Rating chairman stressed.
Similarly, Nigerian Insurers Association (NIA) vice chairman, Mr Oye Hassan-Odukale believed strongly in mergers of existing reinsurers stating that "we (insurers) need to encourage them to merge. I believe that we need a more capitalised reinsurance market," he stressed.
Hassan-Odukale who is also the Chief Executive Officer of Leadway Assurance Company also observed that current reinsurance capacity is inadequate and needs to be beefed up. In this instance, he said insurers should play the role of bringing about this capacity building for their reinsurance requirement.
According to the Leadway helmsman, the requirement for additional reinsurance capacity has become a priority owing to the attitude of foreign reinsurers to the Nigerian market. " They take business decisions. When our risks are bad, they cut us out," Oye streesed.
He believed that now is the time to develop alternative risk reinsurance system that will absorb what the foreign markets consider as not good enough for them. "Africa Re is doing very well but we need more reinsurance capacity," the chartered insurer stated, stressing that the local reinsurance players should merge and increase capital base to at least, one billion naira.
Oye was confident that a strong local reinsurance market will provide players alternatives when their businesses are thrown back at them by overseas reinsurers especially as the indigenous reinsurers understand the market mechanism more than their foreign counterparts.
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