…premiums from oil and gas contracts under threat over declining prices
Insurance industry’s gross written premium rose by 8.40 percent at half year 2019 following significant increase in gross written premiums from engineering, marine and aviation, as well as oil and gas non life insurance services. Gross written premium of eight insurance firms listed on the Nigerian Stock Exchange (NSE) at half year 2019 increased to N52.81 billion up from N48.71 billion in corresponding period in 2018.
The firms in question are Sovereign Trust Insurance, Regency Alliance, NEM, Consolidated Hallmark, Cornerstone, WAPIC, AXA Mansard as well as Universal Insurance. A written premium shows the amount an insurance client is expected to pay on insurance coverage provided to him by an insurance company.
Sovereign Trust Insurance earned N7.27 billion as gross written premium by June 2019, an increase of 2.03 percent over N7.13 billion earned by June 2018. However, when compared with the industry, Sovereign Trust Insurance accounted for 14 percent of the industry grow written premium at half year 2019 compared with 15 percent industry share in June 2018.
Regency Alliance recorded 8.30 percent in gross written premium, from N3.41 billion in June 2018 to N3.70 billion at half year 2019, accounting for just 7 percent of the insurance industry’s gross written premium in both years. NEM Insurance increased its market share from 19 percent in June 2018 when it earned N9.16 billion as gross written premium to 22 percent in June 2019 when it posted N11.8 billion as gross premium, resulting in 28.7 percent growth in premiums during the comparable periods.
The share of Consolidated Hallmark Insurance in both period remained at 8 percent of the entire industry. That was despite increasing its gross written premium by 16.4 percent from N3.74 billion at half year 2018 to N4.36 billion at half year 2019.
Further, Cornerstone Insurance lost a bit of its market share from 10 percent in June 2018 to 8 percent in June 2019. This was attributed to a steep fall in its gross written premium for the period which fell by 13.02 percent to N4.28 billion at half year 2019 from N4.92 billion in similar period last year.
Wapic Insurance accounted for 12 percent of the insurance industry in June 2018 but that market share slightly fell to 11 percent same period this year. Gross written premium was N5.70 billion at half year 2019 as against N5.82 billion last year June.
In spite of growing its gross written premium by 3.97 percent from N13.95 billion as at June 2018 to N14.51 billion in June 2019, AXA Mansard market share fell slightly from 29 percent in 2018 to 27 percent in 2019, although it still remains the market leader.
Universal Insurance recorded the highest growth of 110.03 percent during the period. Its gross written premium rose from N579.2 million in June 2018 to N1.22 billion at half year 2019. Nonetheless, it controls the least market share of just 2 percent at half year 2019 as against 1 percent same period in 2018.
The contribution of each of the services provided was analysed to assess their relevance to the general pool. By services provided, motor insurance’s gross written premium of the eight insurance firms under coverage of this analysis rose by 5.6 percent during the period from N9.40 billion last year June to N9.93 billion in June 2019. Year-on-year, motor insurance services accounted for 19 percent of the industry gross written premiums in both periods.
Fire and property insurance service increased by 5.3 percent from N7.9 billion last year June to N8.32 billion same period this year. In both periods, its share of the industry gross written premiums amounted to 16 percent. Marine and aviation grew by 18.9 percent during the period from N3.65 billion to N4.34 billion this year’s June.
From N17.04 billion in June 2018, oil and gas gross written premium rose by 18.7 percent to N20.22 billion at half year 2019. Its industry share rose from 35 percent to 38 percent during the period. This is a signal of renewed interest in oil and gas insurance bolstered by increasing prices of crude oil at the international market.
“Oil and gas insurance recorded improvement at half year 2019. While this signals the financial strength and capital adequacy of market players, it is also a reinsurance that policyholders (big corporations) now have renewed confidence in the sector.
“We can attribute this to the optimism of the market players that the imminent capitalisation will drive premium growth. Hence, upon the successful implementation of recapitalisation plans, premiums in the coming periods should grow higher”, said Ahmed Akinyele, insurance analyst at Meristem Securities.
But in the last few days, crude oil prices have headed southwards and for the first time fell below Nigeria’s 2019 budget benchmark. This is also a source of concern to industry analysts.
“The falling crude oil prices would impact pricing of those contracts; declining oil prices indicate reduced revenue for oil firms. This would feed into the prices they will be willing to pay for insurance coverage. Meanwhile, the underwriters on the other hand may still embrace such contracts as most of they are willing to lower premiums in order to attract businesses”, Akinyele added.
Engineering insurance services declined by 18.8 percent from N7.63 billion in June 2018 to N6.20 billion as at June 2019. It presently accounts for 12 percent of the market share.