(Sundiata Post) – The clear lack of capacity for terrorism insurance in the Nigerian market and growing incidence of the risks, amidst the negative impact on business and the economy have left the local insurance market with no option but to learn from Indian market’s experience.
Does terrorism risks actually exist here?, the answer is yes, meaning that a lot of the terrorism risks emanating from Nigeria are taken offshore to the London market where the capacity exists.
What this implies is that Nigerian insurers are merely fronting for foreign reinsurers and collecting commissions, while the country continues to lose millions of dollars revenue in premium flight.
Analysts who spoke on the development, said since it has become obvious that Nigeria is hugely hit by terrorism risks, as a result of the activities of Boko Haram in the North-East, as well as political violence in many other parts of the country, and that forming a pool may be the way to go.
They also said that this has become important, as Nigerian risks may be rejected for high volatility, or accepted as high premium, giving that the rate of occurrence is rising.
A report released in July 2017 by the United States Department of State, disclosed that 75 per cent of deaths caused by terrorist attacks across the world, occurred in Nigeria, Iraq, Afghanistan, Syria; and Pakistan.
In 2015, Nigeria was ranked third of the 162 countries of the world that have been worst hit by terrorist attacks, according to Global Terrorism Index, having ranked fourth in 2014.
Savio Fernandes of the General Insurance Corporation of India (GIC) said Nigeria may need to emulate India, stating that India’s Terrorism Pool is doing very well with a lot of capacity.
Fernandes said after the terrorist attack on the International Trade Centre in the US, most insurance companies raised their rates, while some international reinsurers pooled back, which affected a lot of Indian businesses, “so we decided to strengthen our local pool”.
Fernandes, who on the GIC Team that partnered with Nigerian Reinsurance Corporation on capacity building for reinsurance offers in Nigeria recently, said it is something Nigeria should begin to think about.
Nick Sorgo, partner, Energy Division, JLT Specialty Ltd, London, who was looking at global market trends and lessons for Nigeria during a seminar organised by Wapic Insurance Plc in Lagos, said Nigeria is seen as relatively high risks by operators in the London market.
Sorgo said political risks from Nigeria, including terrorism, kidnapping and political violence, could make the country’s insurance rates not attractive to foreign insurers.
Terror insurance in India is growing bigger, with many public and private sector companies and landmark buildings and temples queing up to buy the cover, with the pool swelling to Rs 4,600 crore and growing at 25 percent annually.
The annual premium collection for this insurance cover in the country is about Rs 700 crore and this does not include stand-alone covers bought by big companies like Reliance or Essar and oil companies. The government-owned reinsurance company, GIC Re, is managing the pool in the country.
The 2008 Mumbai terror attacks saw the largest claim on the pool – with the total claim settled touching around Rs375crore.
GIC Re chairman, Ashok Kumar Roy said companies and institutions now realise the need for a terror cover after the 2008 attacks.
Until 2001, India had no terror pool. The country only had a cover for riots, strikes and malicious damage cover, called RSMD. After the World Trade Centre attacks and the Pentagon on September 9, 2001, global reinsurance companies withdrew cover for Indian companies, forcing domestic insurance companies to set up a terror pool. (BusinessDay)