Fitch Ratings says it expects the Nigerian insurance market to return to real gross written premium (GWP) growth in 2018 as favorable fundamentals support long-term development.
The insurance industry in Nigeria declined in real terms in 2016 as high inflation eroded modest nominal GWP growth. As GDP growth picks up and inflation slows, we expect to see a return to real GWP growth in 2018.
Nigerian insurance fundamentals remain favorable. There is a strong potential for economic growth, a young population with a growing middle-class, investor interest and low insurance penetration. These factors are offset by recent economic decline and significant structural challenges such as a population typically skeptical of the benefits of insurance.
Fitch believes the local insurance market would benefit from additional scale. Consolidation and technological improvements could lead to lower operational costs and those insurers that manage to cut costs could gain market share by offering consumers better-value products.
A new risk-based supervision regime is being implemented by the regulator as part of a gradual move to a Solvency II-type regime in Nigeria. This could lead to a new round of capitalization as several insurers have already stated their intent to raise additional funds.
