Nigeria: Agusto & Co. Assigns 'BB'rating to Nigerian Insurance Industry
Pan-African credit rating agency in Nigeria, Agusto & Co. has assigned a "Bb" rating to the insurance industry in its newly published 2019 Nigerian Insurance Industry report.
This rating was assigned based on the size and strategic importance of the industry in Nigeria, and its satisfactory capitalisation ratios. This is expected to further strengthen on the back of anticipated changes in capital requirements for operators across different segments, although it notes that a number of fringe players remain undercapitalised.
The assigned rating reflects heightened risks in Nigeria's geopolitical and macroeconomic environment, weak gross domestic product (GDP) growth, and inflationary pressures. In addition, dwindling crude oil prices, and a contractionary monetary policy stance aimed at forestalling speculative activities on the Naira both impact the rating. Agusto & Co's rating, it said in a statement in Lagos, takes into cognisance the size and strategic importance of the Insurance Industry in Nigeria.
Though relatively small, with a Gross Premium Income as a percentage of GDP at 0.4%, the industry's economic importance is noteworthy. Notwithstanding, the Agency's short-term outlook on the Industry is stable. The performance of underwriters is expected to improve as political uncertainties subside and business operations pick up in the second half of the year. Buoyed by stronger regulatory support and anticipated recapitalisation requirements from the National Insurance Commission (NAICOM), the Insurance underwriting capacity is expected to improve in the medium to long term.
The Agency highlights the primary responsibility of insurers in supporting businesses and individuals recover from unexpected losses promptly, through claims payments, thereby promoting economic growth by mobilising domestic savings most of which are used to fund the budget deficit through investments in treasury bills. Analyst at Agusto & Co, noted that there has been an influx of foreign direct investments (FDIs) over the last two years, which resulted in changes in the industry's shareholding structure. Read more from All Africa.
Source: All Africa