Nigeria: Salvaging Economic Risks Through Insurance
By Rosemary Onuoha
The actions of the Boko Haram sect have led to economic paralysis in some Northern states of the country. However, experts are of the opinion that collaboration between the government and the insurance industry can salvage the situation.
As terrorism daily assumes a widening dimension, international reinsurance companies no longer extend reinsurance cover for terrorism to developing economies battling with the menace.
The reason for this trend, according to findings, is that these international reinsurance firms are of the opinion that most developing economies cannot afford reinsuring their terrorism risks in the international market due to the huge cost involved.
As worrisome as this may seem, experts are insisting that insurance against terrorism is necessary; therefore, countries affected by this development must either choose to combat the rising threat of terrorism or sink with it as the case may be.
In Nigeria, the fear of Boko Haram has adversely crippled economic activities in some Northern states even when the federal government, on daily basis, insists that it is on top of the situation. Even while government claims to be on top of the situation, investigations reveal that there is no concrete insurance plan for providing compensation for loss associated with terrorism.
To this end, stakeholders are calling for collaboration between the government and the insurance industry in the fight against terrorism.
Chairman of New India Assurance Company Limited, Mr. Annur Sekar said that terrorism is a serious cause for concern in Nigeria, as such, the insurance industry must wake up to the challenge with the full support of the government.
Chairman of Nigerian Insurers Association, NIA, Mr. Olusola Ladipo-Ajayi , stated that with collaboration between all stakeholders, terrorism can be defeated.
For the Former Managing Director of Financial Institutions Training Centre, FITC, Mr. Oladimeji Alo, there is no better time for terrorism insurance to be put in place than now.
Alo said “A sound understanding of the Nigerian environment should propel the government to embrace insurance to guard against losses which could emanate from terrorism.”
The collaboration
If only the insurance industry can get the backing of the government, Sekar said that operators in the sector can come together and create a terrorism pool.
He said “In India we have gone through similar situations in the past. Following the 911 incident, the overseas market withdrew the terrorism cover to the Indian market. And what we did in India is that we came out with our terrorism pool with the backing of the regulator and we have a reinsurance corporation. The reinsurance company became the pool manager and the rest of the market players became participants.
“So we started operating a terrorism pool in India and over the years it has become bigger and bigger and it has been able to meet the domestic requirement of the insured. But if the risk is very large, what we do is that we go to the overseas market and try to obtain a standard terrorism policy. But the pool is working very satisfactorily and I think in Nigeria, something like this can be taught up by the regulator here.
“The local reinsurance company can become a pool manager and the rest insurers can participate in that pool and we find out that this kind of arrangement works very well and one doesn’t have to look to the outsiders.”
The challenge
As elaborate as the call for collaboration in the fight against terrorism may sound the biggest challenge to the growth of the Nigerian insurance industry is the government itself.
Managing Director of Custodian and Allied Insurance Plc, Mr. Wole Oshin stated “In other economies, government picks on insurance for progress. Unfortunately government in Nigeria doesn’t even know insurance.”
He stressed that the government needs to recognize insurance, adding “A situation where budgets are discussed and insurance industry is not even invited means that government does not understand the importance of insurance. Our primary and fundamental objective as an industry is to stabilize the economy, produce savings and stabilize the risk of government.
But government has not looked at insurance because they don’t understand it because if they do, then the will give priority to insurance because. In advanced countries, the government can’t do anything without the insurance industry. They can’t even make policies without insurance. Here insurance is not in the center stage yet and I think it is a critical thing,” Oshin stated.
Source: Vanguard (Lagos)
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