THOUGH most areas of the economy are adversely affected by the nation’s wobbling economy, insurance may be one of the worst hit sectors going by The Guardian’s investigation.
Estimated yearly losses of about N750 billion by insurers to the failure of industries underscore the grim picture in the insurance sector.
The losses may have heightened in the last five years, as the inclement operating environment in the country has taken a toll on some manufacturing sub-sectors, hitherto considered resilient.
Some leaders of the underwriting business who spoke to The Guardian lamented that a large number of industries, which used to take policies to protect their factories, warehouses, machinery, raw materials and employees have closed down.
They said the losses computed could be conservative, as premiums lost to collapsed small-scale firms were not captured in the compilation.
In the league of factories that have closed down due to the unfriendly business environment in the country are those engaged in the production of textiles, tyres, automobiles, aluminum, batteries, iron and steel, among others.
Indeed, the Manufacturers Association of Nigeria (MAN) in its report last year lamented that about 960 manufacturing firms closed down their operations due to the harsh business climate, claiming over 800,000 jobs.
Besides, the textile industry in the country, which hitherto had been the major employer of labour, is almost dead as the number of the operational textile firms declined from 178 in the 1980s to less than 20 today, while the two major tyre manufacturing factories in Lagos and Port Harcourt have closed down due to the influx of fairly used tyres.
The insurers pointed out that the losses recorded became manifest as the industrial firms, some of which are merely existing on “life support” measures, used to take a number of policies to protect their factories, machines, raw materials, warehouses, motor vehicles and employees, among others.
For instance, the Managing Director and Chief Executive Officer (MD/CEO), Staco Insurance Plc, Sakiru Oyefeso, explained that the closure of these factories was seriously affecting insurance underwriting business in the country.
He said: “These are the corporate organisations which actually understand the importance of insurance by taking policies to protect their assets, production lines, employees. They import machinery, raw materials, and they pay appropriate premiums. It is unfortunate that the economy is losing several billions of naira yearly.
“We want to appeal to the government and the National Assembly to put up friendly-industrial policies to revive the industrial sector of this country, because apart from generating employment, any country without an effective industrial base is directly killing the economy. The government should address this issue urgently in the interest of the economy.”
The MD/CEO of Niger Insurance Plc, Justus Clinton Uranta, regretted that the economic environment had impacted seriously on the industrial sector in the country, leading to many of the firms closing down, while a large number of workers who were running two or three shifts have been sent to the labour market.
According to him, the decline in the industry sector affects the insurance sector remarkably, and with the closure of these companies, the underwriting contracts they have taken to protect their production lines and employees, which run into billions of naira have been discontinued.
He regretted that the situation had compounded social and economic problems in the country, adding that the government should revive the industrial sector.
The Chairman of the Nigerian Insurers Association (NIA), Olusola Ladipo Ajayi, said the problem in the manufacturing sector had serious negative effects on other sectors of the economy, including insurance.
He said: “The cost of running business in this country over the years has been escalating, forcing many industries to close shops, with some relocating to the neighbouring countries. Consequently, the insurance contract policies they entered to protect their plants and machinery, buildings and employees have been discontinued.
“It is a sad reflection of the economic situation in the country and has put pressure on the government to put measures to revive the sector.”