Nigeria Rejects Fixed Tariffs For Insurance Premiums

Nigeria has strongly opposed setting of tariff for insurance premium arguing that such regime might not work in some climes.

Equally, risk managers are not favourable to face set tariffs for insurance premiums at least in some African jurisdictions.

Nigeria’s commissioner for insurance, Fola Daniel told participants at the just concluded African Insurance Organisation (AIO) conference in Tunis, that market forces could only determine tariff charges, saying it will be unworkable in a global market.

Supporting Nigeria’s positon, Israel Kamuzora, Insurance Commissioner for Tanzania said that concerns had been growing and that many insurance markets were set in a downward pricing spiral, which ultimately may make the sector unsustainable.

Some stakeholders at the conference suggested that set tariffs might halt the trend, Israel Kamuzora and Fola Daniel, noted that any form of tariff was unlikely and would in itself be unsustainable.
Kamuzora also supporting Daniel said: “Set tariffs can’t work because market forces in the reinsurance world are the ones that are determining what should be charged.”

Meanwhile, as investors’ confidence in Africa continue to rise with increasing potential for economic growth, even in the face of terrorism and political violence in parts of the continent, insurers are considering creating pools for risk management.

Insurers argue that terrorism and political risks pool has become imperative to enhance investor’s confidence.

Some stakeholders who spoke on the sidelines of the AIO said insurance should rise to protect growing investments in the continent to achieve projected growth plans.

On average, the continent’s economies will grow 4.5 per cent in 2015 and five per cent in 2016, according to the annual African Economic Outlook report by the Organization for Economic Cooperation and Development, the African Development Bank and the United Nations Development Program.

While the trend indicated that African economies will return to closely tracking emerging Asian countries as the world’s fastest-growing regions, progress is patchy and precarious, the report noted.
Mohammed Kotb, regional managing director, Middle East UIB London said UK Re Pool was established with backing of the government to provide investor confidence.

He said this could be replicated in Africa to sustain the growing investment interest in the Continent. “I do not think it should be country by country, but it could be region by region by region for easy management”

Kotb stated that the significance of the UK Re Pool which has paid about $600 million claims is not in the amount so far, but the confidence level it has offered investors and businesses operation those places.

Edwin Igbiti, managing director, AIICO Insurance plc said it would be a good development to begin to think of it now, but for the long term because we do not have the technical capacity for managing such risks.

“For us in Nigeria, i think we will need to depend on reinsurance capacities overseas at the moment because we do not have the technical competence, and forming a pool is an uphill task for our market”

Pools have not succeeded very well in Nigeria. Except for liability in insurance Pool we have not recorded any other success of any pool because we have not has support and cooperation of operating companies, Igbiti stated.