Fire rate in Nigeria insurance market is set to go up from soft rate that is stuffed with significant losses over several years to market approved new rate to reflect the hard posture of reinsurers after the most significant following after year fire losses. All the actors involved, brokers, primary insurers and the reinsurers have resolved to act on the increase going forward from mid year that enough underwriting muscle have been wired to ward off current losses that has been running for several years.
The direction of the market to increase fire rate come June 2022 was disclosed by chairman/chief executive officer, Boff & Company Insurance Brokers Limited, Chief Babajide Olatunde-Agbeja, (pictured) at a media interaction with members of National Association of Insurance and Pension Correspondent in Lagos. Besides, it was pushed back to June after further discussion by actors in the issue and also, have enough time to communicate this to clients.
Olatunde-Agbeja said the Professional Reinsurance Association of Nigeria had in November 2021 served the Nigerian Insurers Association and Nigerian Council of Registered Insurance Brokers of their resolve to increase fire rate at the December 2021/ January renewals but the brokers countered that they don’t have enough time to take the new rate to the clients as the renewals were just few weeks to December 2021, arguing that time was needed to discuss with clients. However, he said brokers admitted that the reasons adduced for the increase were germane.
Boff & Company helmsman said he is in agreement with the reinsurers that the market is soft but it will take a measured underwriting process involving all players to address it. He muted that the increase was significant but would not commit that it could be up 400%; however, reinsurers punctured a high rise of such mark insisting it is below.
A reinsurer with a firm knowledge of the issue who pleaded anonymity, said the reinsurers appetite to inflate the sagged fire rate is not an unusual thing where the market is hard or soft for different lines of businesses. According to the source, shift in rate could be triggered by a leader who draws attention to say “we are all making losses and everybody goes back to the statistics and know that this is not sustainable.”
The reinsurer re echoed the bases of insurance practice where a few policy holders a paid claims from the pool contributed by rest. But the fire scenario was that year after year it was established that premiums collected are not sufficient to pay the claims, “which means its not sustainable when it is so over a period.”
What has happened it was cleared, was a reaction to adjust rate so that business continues. Besides, reinsurers said its not new that rates are adjusted. The 9/11 terrorists attacks they cited, was a typical example where one incident can trigger rate increase, whether its one event or two risks came up, because before the attacks nobody thought it was a reality, the twin towers were were attacked in one go. In the aftermath of this the international market reacted to aviation risks in terms of exposure and increase in rates. Drawing that analogy, they said the rate increase in the local market was a reinsurance reaction based on exposure in the market and, according to them, “that is what is reasonable.”
Defending the increase, the reinsurers said everybody in the industry saw it and agreed with it and in united manner set to correct the repeated market losses. Again the the reinsurers were quick to assert that the rate will not come close to 400%, pointing out that rate increase in the insurance market is not in tandem with government way of raising prices or tariffs. They insisted that this is a typical market response and based on statistics and not that somebody sits down to increase rate. They explained that they don’t “want the public to be misinformed neither do we want the insurance market to be extinguished (on account of soft fire rate and yearly loss exposures.)”