The primary developments mentioned by Nigerian insurers relate to regulatory changes. There have been increases in capital requirements aimed at driving industry consolidation through the creation of a smaller number of larger and well capitalised insurers. The drive to increase capitalization of existing insurers has resulted in a ‘moratorium’ on new licence issues with the result that consolidations through mergers have increased. The number of registered insurers has reduced from 140 in 1994 to 58 in 2014.Despite this drive, one respondent cited that the top 10 insurers only cover about 50% of the market, pointing to more consolidation being required. Current capital requirements are factor-based without regard to the nature of risks. NAICOM has however announced a process of moving towards a risk-based supervision framework. Composite insurance companies are currently allowed and the minimum capital requirements are as follows: • General Insurers: NGN 3 billion (US$15 million at current rates);
• Life Insurers: NGN 2 billion (US$10 million at current rates);
• Composite: NGN 5 billion (US$25 million at current rates); and
• Reinsurers:NGN 10 billion (US$50 million at current rates). Regulatory approval is required prior to the introduction of any new products for any class or category of insurance business. NAICOM introduced the Market Development and Restructuring Initiative (‘MRDI’) in 2009 with the primary objective of encouraging growth in the insurance market by promoting insurance culture in Nigeria. A “no premium, no cover” rule which ensures that no insurer will grant cover without fully receiving the premium or a premium receipt from the relevant broker has also been introduced. This development has led to improvements in the payment of premiums to insurers, improving their cash flows and liquidity. However the “no premium, no cover” policy has reduced retail buyers who typically prefer to buy insurance on credit. Participants recognise the active supervisory role NAICOM is increasingly playing. The following regulatory changes, which are positive for the growth of the local insurance market, were also cited: • Compulsory group life insurance and annuity purchase at retirement;
• New Risk management guidelines for insurers aimed at improving governance; and
• The compulsory adoption of IFRS which has enhanced transparency in financial reporting.
Following the repeal of the Universal Banking licenses in 2010, Nigerian Banks were instructed to disinvest their controlling interests in insurance. Banks however continue to partner with Insurance companies and the Central Bank of Nigeria thus issued formal Guidelines on Banassurance products – Referral Model in March 2015. The guidelines set out the regulatory framework for the offering of Bancassurance products through the nonintegrated referral model. This is a significant channel for Inusrance companies. As at the end of the 2013 financial year $90 million worth of gross premium was written through banks (5% of total industry gross premium). Insurers which do not have unique partner banks are also exploring alternate avenues of distribution. An alternate avenue, with similar reach, is the use of mobile telephone network and other major retailers to distribute insurance products. Major South African insurers which have acquired stakes and strategic partnerships with Nigerian banks are: • Mutual and Federal Insurance Company of South Africa and Old Mutual Nigeria formerly Ecobank/Oceanic Insurance); • Sanlam and First Bank in FBN Life; • MMI and UBA Capital in UBA Life; and Liberty and IBTC Standard Bank. Other multi-national corporations invested in the Nigeria insurance market include: • NSIA Group and ADIC Insurance • AXA Group and Mansard Insurance • New India Assurance Company, India and Prestige Assurance