The Nigerian insurance market may yet come to terms with hard market despite the losses from #EndSARS protests. This is on the premise that preponderance of hard market indicators, have not sharpened enough to cut deep into risk pricing and drain the fluid off soft market.
The large pool of events during the #EndSARS protests across the country, called to question the level of insurance liability to the losses and the scope of insurance purchased by the individuals, corporate and the tiers of government and, which if they were severe, would impact on pricing of risks and also the location.
The market has been cautious about the use of hard market which the developed market has settled for, as a result of huge claims arising from Covid-19 and yet to be determined avalanche of litigations and arbitrations. The global insurance market continues to harden and insurers look to introduce additional coverage restrictions to manage their exposure to cyber and pandemic risks.
However, operators and the regulator in Nigeria are on the same page that free endorsements which insurers offered before the protests, they are under obligation to adhere and comply as policy specified. However, the current policy spin is that new endorsements would attract a price going forward and guidelines to this effect are now in the works in the Commission.
The first public reaction that the rule of engagement for free endorsements will change at end of year policy renewals was pushed out by the Group Managing Director, Consolidated Hallmark Assurance Plc, Mr. Eddie Efekoha, at the firm’s Time Out With Our Partners in Lagos. There, he reminded the attendees that the paradigm of free endorsements has shifted, “we granted riot, civil commotion and strike free as an extension to standard motor policy, we know better today.”
Defending the expected underwriting change, he said “the environment we live in is tense” and “we need to preserve investments and price risks very well.” Besides, he said when the capital raise is done, it will be indefensible to deploy N10b capital general business tag for the purpose of granting free endorsements.
Also concerned that unchecked free endorsements could bring pressure on insurers, Commissioner for Insurance, National Insurance Commission, Mr Sunday Thomas, raised the stakes, and dwarfed free endorsements making any full stretch for them at coming renewals well below the mark for such benefits.
Thomas explains, “It is pertinent to note that insurance coverage for strike, riot and civil commotion clauses, which were redundant in the past and which by competition are mostly offered free of charge must now be adequately rated as an important product for the survival of Nigerian businesses.
“The Commission will be issuing directives to ensure that underwriting is strengthened to appropriately rate and charge requisite premiums so that profitability can be adequately rated as an important product for the survival of of Nigerian businesses,” he stated.
A major reinsurance player, the deputy managing director/chief operating officer at African Reinsurance Corporation, Mr. Ken Aghoghovbia, drew a divide between the expected hard market in the international market which is driven by the recent catastrophe losses and the large Covid-19 claims and the Nigerian scene spiked by the recent #EndSARS protests, and stated that price reaction at renewals will not follow the same order.
Aghoghovbia presents the two perspectives: “The international market is clearly hardening, driven by the recent catastrophe losses and the large Covid-19 claims awaiting legal certainty against the act. (The Nigeria situation will follow the international trend) only if the the insured losses turnout large. From every indication only minor hardening is to be expected for now (in the local market).” Therefore, he infers that putting upward pressure on rates will not be across the board nor will it be the norm.
On how the primary carriers, insurers, would react, he said it will be closely related to background of shrinking capacity for risks. Besides, he said several factors come to play to shift price from soft to hard. “The size of losses from the #EndSARS protests can only be established after the claims have been adjusted.”
He reiterated that, “prices may react only if the insured losses turn out large. From every indication only minor hardening is to be expected for now.”
Speaking on the scope of cover for the losses and insurance liability to #EndSARS losses Mr Nona Awo, an integrated shareholder, said the spill over from the losses send clear message to the insured and the insurer.
He said those who who do not have adequate cover will only be settled by the insurer as the cover permits. In the same manner, he said insurers that do not have adequate reinsurance treaty will have to bear full extent of cover without recourse to reinsurance full intervention unlike if there was adequate reinsurance protection for the insurance company.