US/Iran War: Nigerian Insurers to Grapple with High Reinsurance Rates at Global Market

Ebere Nwoji

Nigerian insurance operators will get a fair share of negative effects of the ongoing United States/Israeli attack on Iran in their next reinsurance renewal period, Commissioner for Insurance, Mr.  Ayo Olusegun Omosehin, said.

Omosehin said insurance business was an international business in which risk bearing was shared between local and offshore insurers.

According to him for Nigerian insurers, most of their reinsurance businesses are ceded abroad to international reinsurers who determine the rate payable on any business.

He said in the course of the US, Israeli/Iran war, there had been massive destructions of businesses, infrastructures, installations and structures that would  expose the global Insurance landscape to huge claims, which  would definitely  result in upward review of reinsurance rates.

As such, Nigerian underwriters who reinsure most of their high-tech businesses abroad would face high reinsurance rate when they want to do their next round of business renewals.

Nigerian fulfil federal government’s local content law of feeding local insurance and reinsurance firms with businesses before taking the surplus offshore, often reinsuring businesses with global reinsurance giants, like Swiss Reinsurance Ltd, Munich Reinsurance, Lloyd’s of London, Allianz, AXA and GIC Re of India, among others.

The giant reinsurance firms determine premium rate payable on all classes of reinsurance business coming from across the globe and most times the quantum of claims payable on these risks and frequency of risks occurrence are determined offshore, not in Nigeria.

Nigerian insurers primarily seek reinsurance cover abroad for high capacity, complex and emerging high-tech risks that the local market was not yet equipped to handle as well as remnant from what the local content law cannot accommodate.

Some of the risks were cybersecurity and electronic fraud risk, oil and gas/energy risk, technology and critical digital assets risks, bankers and blanket bonds risk, aviation risks, energy transition and Infrastructure risks among others.

At a press briefing on the activities of NAICOM, Wednesday in Lagos, Omosehin said because of massive destruction of oil installations in Iran as a result of the war the global insurance and reinsurance market would be inundated with high claims rate which would cause reinsurers to upscale their reinsurance rate.

According to him, this would have trickle-down effect on Nigerian insurers who will next year or even this year be visiting the global reinsurance arena for renewal of their reinsurance policies.

NAICOM, however, assured Nigerian insuring public that no policyholder would suffer losses as a result of the ongoing recapitalisation and reform programme going on in the insurance sector.

Omosehin assured Nigerians that the recapitalisation exercise, which deadline remains July 31st, was aimed at building a stronger and more resilient insurance sector.

He said the recapitalisation programme was a key pillar of the reform agenda aimed at strengthening insurers’ capital base, improving claims settlement capacity, and enhancing the ability of Nigerian insurance companies to underwrite larger risks across major sectors of the economy.

He stated that the recapitalisation exercise would place insurance firms on a better standing to pay claims seamlessly.

“Our primary responsibility is to protect policyholders. We will ensure that no Nigerian who has entrusted his resources to insurance companies suffers because of the recapitalisation process,” Omosehin assured.

He stated that the commission had put in place regulatory safeguards to ensure that the interests of policyholders remained fully protected throughout the transition period.

The NAICOM boss added that the reform programme formed part of a broader strategy to modernise the insurance industry, restore public trust, and align Nigeria’s insurance regulatory framework with global best practices.