The Nigerian insurance market has been advised to consider establishing a terrorism risk pool in order to build sufficient capacity to tackle the country’s high rate of terror incidents, according to industry reports from the region.
Nigeria experiences some of the highest rates of terror incidents across the world, but owing to a lack of capacity and high volatility, which suggests higher premiums and a lack of commitment, much of the country’s terror risk is transferred to the London market.
This is according to an article on the Sundiata Post, which states that with much of the terror risk being taken offshore and to the London market, Nigerian insurers are essentially serving as fronting companies for foreign reinsurers. And while the Nigerian insurance companies are collecting commissions for their services, millions of dollars of premiums are exiting the country, warns the report.
Highlighting just how serious the terror threat is in Nigeria, a 2015 report ranked Nigeria third out of 162 countries that have been worse hit by terror events, while a 2017 report found that 75% of terror-related deaths occurred in Nigeria, Iraq, Afghanistan, Syria, and Pakistan.
According to the report, Assistant General Manager at India’s state-backed General Insurance Company of India (GIC Re), Savio Fernandes, has said that Nigeria could look to copy India and establish a state terrorism risk pool.
Furthermore, Nick Sorgo, a Partner within the Energy Division of JLT Specialty, London, while speaking at a recent seminar, said that foreign insurers and reinsurers might view Nigerian political risks, such as terror, kidnapping and political violence, as unattractive.
Fernandes continued to explain that the Indian terror pool continues to grow in size, with a number of public and private sector entities reportedly queuing up to secure coverage. As a result, India has greater capacity to manage its own terrorism risk without such a need for foreign involvement, which, the report states is something the Nigerian market should consider in order to improve its terrorism risk landscape.