Challenges of Emerging Risks Underwriting in Insurance in Nigeria
Wednesday, April 22, 2015
Recent social and environmental developments in Nigeria have underscored the need for Nigerian insurers not only to consolidate on local risks they are familiar with but to pay more attention to emerging risks, writes Ebere Nwoji
Emerging risks are newly developing or changing risks which are difficult to quantify and which may have a major impact on an organisation or an economy. Insurers said emerging risks are driven by new economic, technological, socio-political and environmental developments as well as the growing interdependencies between them, which can lead to an increasing accumulation of risk.
Presently in Nigeria, losses emanating from social vices like kidnapping, terrorism activities from the Boko Haram insurgents as well as huge losses from climatic change factors like flood and other similar negative developments in the country, which amount to huge loss of lives and property are categorised as emerging risks.
Some insurers believe they lack the capacity to play in this line of business while others regard the emerging risks as uninsurable.
A close watch at the activities of the insurers shows that since the launch of the regulator’s medium term plan for deepening insurance penetration in the country tagged Market Development and Restructuring Initiative (MDRI), Operators are fast changing from their stereotyped business style of competing for government businesses like group life insurance to becoming more versatile in looking inwards to the opportunities in other business lines like micro insurance which many are experimenting on today.
But they are still far from looking into the emerging risks area, which many said has to do with huge losses that are capable of sweeping the entire capital and asset of an insurance firm.
This perhaps is because emerging risk is still new in Nigeria and obviously not yet included in the profile of many insurance firms but the need for their inclusion are currently starring on the faces of insurers.