With many businesses counting losses estimated in billions of naira, most insurance firms who are faced with the grim prospects of settling claims arising from loss of properties and assets destroyed by hoodlums who cash in on the EndSARS protest are already groaning.
Giving insights on the capacity of insurance firms to settle claims, analysts have projected unprecedented rise in insurance claims judging by level of damages perpetrated across the country recently.
Aftermath of the #EndSARS protest hijacked by hoodlums may have a rippled negative effect on the insurance segment of the economy, which is currently in the process of recapitalization.
As December deadline for phase 1 recapitalization of the industry is fast approaching, pressure is already mounting due to expectation of massive claims by policyholders affected by protest turned red.
Analysts said insurance penetration in Nigeria is quite hollow, but most of the government properties are expected to be covered comprehensively.
The Lagos State governor Babajide Sanwo-Olu was reported to have said the state alone would need about N1 trillion for reconstruction after the destruction caused by the hoodlums.
The massive destruction of both public and private property has sparked worries on the ability of the insurance sector to cope with the expected number of claims.
Shedding more light on the development, CSL Stockbrokers in a note said the Nigerian insurance sector remains largely underdeveloped.
“Insurance penetration still at about 2% and with the sector contributing less than 0.5% to the nation’s gross domestic products,” CSL Stockbrokers added.
The Insurance sector is currently reeling from the effect of the Covid-19 pandemic, with the sector posting a contraction of 29.53% in the second-quarter GDP report published by the National Bureau of Statistics (NBS). It is likely to drop into a recession when the NBS releases its third-quarter GDP report in a few weeks’ time.
CSL stated that though it is yet to recover from the effect of the Covid-19 pandemic which has resulted in an increase in in health, travel and business disruption claims.
Expectedly, the #EndSARS loss incident is covered in insurance under policies that extend to riot and civil commotion. So, fire and burglary or Commercial property insurance if extended covers damage that results from vandalism, rioting and civil commotion. These policies specifically include coverage for acts of looting in connection with a riot or civil commotion.
With many insurance firms in Nigeria set to incur claims following the violence and looting across Lagos and other parts of the country, operators fear this may be a setback for the industry.
It is however not too clear how much of the #EndSARS loss incident is covered under the different types of available policies.
According to NAICOM, Insurance companies paid a total non-life insurance claim of N64 billion in 2018 compared to N56.4 billion a year earlier. Out of this total, claims on fire insurance were about N9.1 billion while Motor Vehicle was N17.3 billion.
The massive destruction of both public and private property has sparked worries on the ability of the insurance sector to cope with the expected number of claims.
Ademayowa Adeduro, managing director/CEO, Law Union & Rock Insurance plc, says the loss is colossal and I am not sure whether we have witnessed this before, apart from the Civil War era. “The destructions are massive and because there was curfew, the perpetrators had a field day going around looting, setting houses, banks, shops on fire. Insurance industry is going to pay heavily for it,” Adeduro stated.
