Nigeria’s oil and gas insurance retention capacity decreasing.

Ibekimi Oriamaja Reports

The retention capacity of insurers in the oil and gas business is declining.

The National Insurance Commission’s (NAICOM) second quarter 2022 report, released over the weekend, showed a 2.2 percentage point drop in oil and gas retention proportion from 42.3 percent to 40.1 percent.

Furthermore, Nigerian insurers have been unable to maintain the 70% minimum capacity of the oil and gas business required by the Local Content Act.

Concerning claims settlement, the commission stated that the percentage of incurred claims versus reported claims reflects market retention during the period.

The commission maintained that the performance of the oil and gas industry in terms of claims settlement had improved slightly compared to the second quarter of the previous year, and that continued market development and growing confidence in the industry would alleviate the negative characteristics and challenges of that segment of the market.

According to NAICOM, non-life insurers made progress in claims settlement, recording 85.7 percent of claims settlement ratio, an increase of 43 points from the previous year’s position of 42.8 percent.

Meanwhile, the motor insurance industry maintained its lead in claims payment, with non-life insurers reporting a claims settlement ratio of 92% out of N148.2 billion paid during the review period.

The industry statistics for gross claims in the second quarter of the year stood at N174.8 billion, accounting for 47.3% of the N369.2 billion in premiums generated during the period.

The commission also stated that premium retention capacity operational confidence remained high despite the financial system and economy’s economic challenges, as evidenced by the sector’s retention positions.

Overall, the life business retained 93% of the period, while non-life retained 55%, while the industry average was 70.5 percent.

“The retention in the non-life sector, despite reporting an above-average level, relative to its prior position of 59.4 percent in the corresponding period of the preceding year, would require focused attention for improvement as it declined by more than four points, representing 8%, year on year,” the commission said.

“Performance by various classes in the non-life segment of the market shows that all classes performed above average, with the exception of the Oil and Gas business, which retained 40.1%.”

“This indicates a decline in the market’s Oil and Gas retention capacity compared to the same period in 2021, when it recorded about 42.3 percent retention proportion,” the report stated.

Explaining the insurance claims component, NAICOM stated that the gross claims reported increased by 0.2% during the quarter compared to the same period in 2021.

“In the second quarter of 2022, the industry statistics for gross claims stood at N174.8 billion, representing 47.3 percent of all premiums generated during the period.” This occasion reflects the industry’s professional underwriting capacity as a result of the Commission’s increased regulatory activities.

“On the other hand, net claims paid stood at N148.2 billion, representing 84.8 percent of all gross claims reported during the period.” The life insurance business achieved a near-perfect point of approximately 88.90% claims settlement as compared to reported claims, while the non-life segment stood at approximately 76.8 percent.

“The percentage of incurred claims versus reported claims reflects the market retention view during the period.” Motor Insurance maintained its lead, with a claims settlement ratio of 92%. Progress was more visible in the Oil & Gas sector, which had a claims settlement ratio of more than 85.7 percent, up 43 points from the 42.8 percent recorded in the same period in 2021.

“Miscellaneous insurance also posted a 61.9 percent paid claims ratio, which was higher than 44 percent in 2021.” “While General Accident was 75%, Fire was 76.2 percent, and Aviation and Marine were 61.9 percent in that order,” the commission added.