UNDERWRITERS TO HIKE PREMIUM RATES THIS YEAR
COST of insuring assets and businesses in Nigeria this year, may go up due to over 50 per cent increase in premium rates by reinsurance companies world-wide, as a result of adverse claims experienced from insured losses.
The Guardian gathered that besides the hike in premium rates, the terms and conditions for accepting businesses have further been tightened.
Reinsurance companies act as a financial backstop to primary insurance companies, helping to pay for big ticket claims in return for part of insurers premium. They underwrite more than 60 per cent of the risks carried by insurance companies.
A chieftain of an underwriting firm in the market confirmed: 'We have just concluded our reinsurance security arrangement in South Africa for this year and the truth is that the rates have gone up by as much as 50 per cent, particularly in the energy risks over the previous year. The implication is that if this market must survive, we have to write the business according to international best practices'.
Also, the Regional Director, West Africa, African Reinsurance Corporation (Africa Re), Mr. Ken Aghoghovbia, told The Guardian that the hike in rates will definitely affect the purchase of reinsurance cover locally and off-shore, because insurance is an international business, 'what happens over there affects the local market.'
'What this means, he said, is that we should operate the business professionally according to international best practices in order to meet stakeholders expectations particularly in the settlement of claims.
'The fact is that reinsurers have stopped writing certain classes of business, others withdrew from specific markets due to losses. The international reinsurance community seems to have returned to the professional pre-occupation which is to make profit, and that is why they are in business anyway. Therefore, market conditions have become harder, prices escalated, while the exigencies for right volume and accuracy of statistical information became more stringent'.
Meanwhile, the National Insurance Commission (NAICOM) has specified guidelines on reinsurance arrangements that insurance companies should procure to back up insurers capacity for energy risk.
For instance, all reinsurance arrangements with a foreign reinsurer shall be with a company having a minimum financial strength rating (FSR) of S&P 'A' or A.M. Best 'A' rated companies.
Besides, treaty reinsurance arrangements shall be construed as part of an insurers capacity for the purpose of determining local capacity or retention. Any other reinsurance programme/facility shall be acceptable in determining local capacity or retention only after the security has been confirmed for each risk.
All facilities, according to the commission, shall be admitted subject to 'value added ' such that the insurer gain and/or improve upon technical knowledge of risks within oil and gas industry.