(The following statement was released by the rating agency)
Link to Fitch Ratings' Report(s):
https://www.fitchratings.com/site/re/10110509
Fitch Ratings-London-February 18: Fitch Ratings says in a new report that higher
minimum capital requirements introduced by the Nigerian insurance regulator will
necessitate consolidation among insurers and could ultimately be credit-positive
for the industry.
The National Insurance Commission (NAICOM), the insurance regulator in Nigeria,
has recently introduced higher minimum capital requirements for insurers with a
31 December 2020 deadline. This has led to a drive for recapitalisation in the
industry as insurers seek to either raise more capital or engage in mergers and
acquisitions to meet the new requirements.
In our view the Nigerian insurance market is fragmented and intensely
competitive, which we believe limits the sector's premium growth prospects. The
insurance industry in Nigeria has declined in real terms in recent years as high
inflation more than offset modest nominal gross written premium (GWP) growth.
Fitch expects a further decline in real terms in 2019 as inflation continues to
exceed GWP growth. We estimate GWP growth at around 8% in 2018, compared with
average consumer price inflation of 12.1% in 2018.
Fitch sees strong fundamentals supporting the long-term development of the
insurance industry. These include Nigeria's economic growth potential, a large,
young, growing population and low insurance penetration.
We believe that scale is a key credit differentiator in the Nigerian insurance
market. Fitch believes scale can be leveraged to realise cost- and
revenue-synergies, thereby improving profitability, while the strengthened
claims-paying ability of insurers could help to build trust with a population
that is sceptical of the benefits of insurance. Larger insurers in Nigeria have
tended to outperform smaller rivals in real GWP growth and profitability.
More information is available in the special report, "Nigerian Insurance Sector
Recapitalising", which is available at www.fitchratings.com
Contact:
Eugene McGeown
Senior Analyst
+44 20 3530 1767
Fitch Ratings Limited
30 North Colonnade
London E14 5GN
Willem Loots
Senior Director
+44 20 3530 1808
Media Relations: Athos Larkou, London, Tel: +44 20 3530 1549, Email:
athos.larkou@thefitchgroup.com.
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