Of Insurers and Menace of Emerging Risks 

Losses from disaster such as climatic change, especially flooding, civil unrest and cyber crime which together form emerging risks, has created need for insurance operators to gird up their belts to protect Nigerians from risks associated with these new phenomena, writes Ebere Nwoji

Recent reports in the media which said that over 200 communities in four local councils of Rivers State, namely – Ogba/Egbema/Ndoni (ONELGA), Ahoada West, Ahoada East and Abual Odual – have been displaced by flood in addition to communities in Anambra, Kogi, Bayelsa and Delta  states swept by flood, points to the faster rate at which Nigeria is topping the list of countries prone to  emerging risks especially flood.

This apparently spells the need for Nigerian insurers to get prepared to bear losses emanating from these risks and to design and advertise products that will arouse people’s interest in buying insurance policies that will mitigate against these risks.

Disasters

Indeed losses from disasters as a result of climatic change, civil unrest, cyber crimes among others, which sum up what insurers tagged, “emerging risks,” is fast becoming the key source of huge claims for Nigerian insurers and their global market counterparts throwing challenge to Nigerian insurers and people on the need to prepare ahead of the ravages of these risks through innovative product designs and penchant for insurance patronage.

The government on its part should partner with insurers to compel people to prepare against these risks through preventive measures and insurance patronage rather than giving relief packages, which hardly place victims anywhere close to their former state before the risks occurrence.

Insurance by its nature is a risk-mitigating factor that places a policyholder on the exact financial position he was before the occurrence of the risk. 

Obviously, some of the people displaced by the 2012 flood settled by government in various Internally Displaced People’s (IDP) camps are still there as destitute and are far from regaining their financial standing despite relief packages sent to them by government, philanthropists and various donor agencies. But insurance policy and claims would have gone a long way to reestablish them.

According to the River State flood report, six persons lost their lives while trying to cross through the flood to the road at Ihuike community in Ahaoda axis of the East-West road.

An eyewitness said a woman and her son were swept off by the flood. While the baby was later found dead, the mother has since remained missing.

It was also gathered that eight persons in a boat were also swept off by a flood, leaving four dead while others survived.

Media reports said that the  Orashi region of Rivers  State comprising the three councils experienced the worst flooding in 2012 where several lives were lost. Also, in 2016, 2017, 2018 and 2020, flooding wreaked havoc in Rivers State but no concrete action was taken by the government to address it.

While many homes were still battling to recover from the damages of the past years, the state has again been hit by flooding. For instance, In ONELGA, over 20 communities have been submerged with bridges, roads, farms and schools covered by water. Several farmlands have been washed off and many artisans rendered jobless when their shops were submerged.

Also in both Anambra and Delta States, many homes were submerged  by flood chasing the occupants away and over running the farmlands.

One of the flood victims, Mrs. Justina Wilfred was quoted to have said: “We have lost everything we have, no shelter, no food, nothing. It is really disheartening.”

Obviously these have no insurance cover because of ignorance and unavailability of specific policy that would address this kind of problem.

Compensation

It was also reported that Governor Nyesom Wike  of Rivers state had approved N1billion for emergency relief measures to support the victims.

But good as his kind  gesture is, it has raised the question on how far the N1 billion will go in reinstating the victims to their former financial position  before the flood risk.

Apparently, despite government’s huge intervention during the 2012 flood it is obvious that some are still in displace persons’ camps.

Some of the displaced persons complained that when such aids and relief items were provided, they hardly received them calling for the need for insurance coverage for such people.

Floods aside, similar report by the Allianz Global & Specialty (AGCS), in its 2021 Risk Barometer noted that significant increase in the number of riots, demonstrations and vandalism have made civil unrest the main political risk exposure for companies as well as key source of claims for insurance firms, which is also another lesson for the insurers.

AGCS, a leading global corporate insurance carrier and a key business unit of Allianz Group, in the report, cited country by country instances of civil unrest with attendant damages to businesses, with particular reference to Nigeria, saying that violence that trailed the #EndSARS demonstrations in Nigeria, student protests in South Africa or clashes in Ethiopia with their damages, disturbances and ultimately, losses from riots, protests, vandalism or other forms of civil unrest were among the main political risk exposure for companies.

Industry analysts said in the face of these developments, Nigerian insurers are expected to shift from their culture of racing for government business and those of corporate organisations at all cost to think bigger on how to harness the opportunities existing in these emerging risks and at the same time save Nigerian economy from huge losses emanating from the risks.

According to industry observers, insurers current stance on relying on extension covers to address claims from these new risks will do more harm than good to the already dented image of the insurance sector, as the insured, when a client is denied of claim on a particular policy he bought because of non purchase of extension cover, He will conclude that the insurance firm in question has defrauded him and denied him claim.

ENDSARS Protest Risks

An instance is claim from damages caused by disrupters of EndSARS protest in which the insurers said they would only pay claims to victims who bought extension to the main policy cover they paid for.

A veteran insurer and erstwhile Managing Director, FBN Insurance, Mr. Val Ojumah, in a telephone response to THISDAY’s enquiries said, “We are purely business operators and can only pay claims purely on business ground.

Insurers can only pay claims to those whose policy purchase covered the cause of the damage through extension.”

He said anybody who did not buy the extension policy would have to wait for the government’s support.

Stakeholder’s View

To the FBN former boss and other insurers, this is right, ideal and logical, but to an average Nigerian who bought insurance policy cover, it is pure fraud as far as they are concerned. For the members of the public, insurance  policy cover once purchased has been purchased irrespective of whether there is extension or not, claims must be paid.

In their view, anybody who bought cover for a risk must be indemnified when risk occurs with or without extension.

Indeed for members of the insuring public, the issue of extension raised by the insurers in the EndSARS claims is always the case.

According to them, most times, insurers do not pay claims not because they don’t have the money to pay but because they will always bring up argument on the extent of coverage of policy bought.

This has spelt the need for insurers to design and sell specific policy for specific risk instead of relying on the extensions, which many Nigerians neither understand nor believe in.

Tackling Emerging Risks

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 factor 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.

According to the Managing Director of Universal Insurance, Mr. Ben Ujoatuonu, the emerging risks like social and political unrest is a challenge to both the insuring public and to insurers.

Ujoatuonu, in a telephone chat told THISDAY that recent happenings in the country like the #EndSARS protest are enough to encourage Nigerians to embrace insurance services.

According to him, the destruction of businesses by hoodlums during that particular civil unrest should serve as an eye opener to Nigerians on the need to buy insurance for protection because no one knows when risks of this sort will come.

He said there was likelihood that this type of commotion and the associated risks on lives and properties would come again anytime because peoples’ expectation from government was becoming higher and government could not  totally meet these expectations.

On the part of the insurers themselves, he said it was equally a challenge for them to brainstorm and come up with policies that would cover damages caused by these emerging risks.

Natural Disasters

Over the years, scientists and environmental experts have been warning against the negative effects of such climatic change like global warming on the environment.

They have been calling for action plans by governments and risk prevention and mitigating experts and agencies to prevent and provide for the effects of climatic change.

A group of scientists called union of concerned scientists in their recent reports on the impact of human activities on the environment said: “Human beings and the natural world are on a collision course. Human activities inflict harsh and often irreversible damage on the environment and on critical resources. If not checked, many of our current practices put at serious risk the future that we wish for human society and the plant and animal kingdoms, and may so alter the living world that it will be unable to sustain life in the manner that we know”.

The group warned that fundamental changes are urgently needed in order to avoid the collision the present course would bring about.

The report said among all the natural disasters that affect man, flood has the worst disastrous effect in terms of human life and material resources destruction. The report therefore called for action plan against the devastating effects of flood.

In response to this call, governments of advanced countries like the United States of America has among other actions set up what it called National Flood Insurance Programme (NFIP).

The program enables property owners in participating communities to purchase insurance protection from the government against losses from flooding.

But for developing country like Nigeria, there is the feeling that natural disaster risk like flood is the exclusive of advanced and industrialised countries like America, Australia and Japan which are known to have engaged in industrial activities that cause climatic change as a result of the ozone layer depletion.

With this feeling, both Nigerian government and the insurers remained passive to plans to mitigate losses from these emerging risks.

However the Commissioner for Insurance, Mr. Sunday Thomas, in a recent interaction with the media said Nigerian insurers could no longer ignore emerging risks because of its resurgence.

He challenged the insurers to put on their thinking caps for market innovations in terms of product offerings to address present and future problems.

Also the Nigerian Council of Registered Insurance Brokers (NCRIB) in their recent National insurance conference hinged their deliberations on security challenge and the ravaging floods in Nigeria.

The Insurance brokers at the conference expressed much concern about the rise in floods which rendered many homeless and lots of property destroyed

President of the NCRIB, Mr Rotimi Edu said the theme of the conference, Insurance in the Face of National Security” could not be more apt than now, considering the challenging security situation in the world and the country today.

Edu said insurance and security were not something that could be separated. 

“Needless to state that insurance and national security affect each other.  There is no way risks exposure which insurance exists to succuor would not be rife in an environment challenged by insecurity”

“There are exposures of lives and properties in a period of social commotion and general insecurity, necessitating the need for the public to have a perfect understanding of their roles towards better acceptance of insurance at a time like this”

“It I is an irony that just as we speak, the country’s exposure to activities of criminal elements such as Boko Haram and Bandits have been a continuous threat to our collective peace. The country has not yet clamped down on security challenge before floods ravage some parts of  the country,” he said.

2012 Flood Risk in Nigeria

The 2012 flood which reports by the National Emergency Management Agency (NEMA) said costs federal government a whooping N2.6 trillion took everybody by surprise and proved insurers wrong in their thinking that natural disaster risk was remote to third world and developing country like Nigeria.

Environmental experts who analysed the impact of the 2012 flood said it was indeed one experience that would remain indelible in the minds of Nigerians and calls for risk intervention plans for the future.

According to the experts, one of the sectors that was looked upon to step towards mitigation plan against flood risk was the insurance industry.

They viewed that the industry was a risk bearer and pillar upon which the economy of every country stands; so it was  expected to collaborate with government to put in place adequate risk preventive and risk mitigating plans for Nigerians who may fall victims of this flood destructions.

Operators’ Plans

The industry operators shortly after the 2012 flood realised that they could no longer ignore their responsibility in this regard called for collaboration with government to face the challenge.

The former President of the Chartered Insurance Institute of Nigeria (CIIN), Mr. Kayode Lawal had during his tenure as the CIIN President made a call for what he described as intervention fund from government to enable the industry go into natural disaster risk cover which he said fell within emerging risk profile.

He said the industry needed such assistance from government because the risk was so huge that insurers alone could not cater for it without government intervention.

The response of government to this call was still not seen while year in year out issues of climatic change especially flooding continues to challenge both federal and state governments.

Here in Lagos, the story told by people living in some parts of the state, especially Lekki area is not different.

Lessons from Disasters, Insecurity

Observers have said that experience from huge losses incurred by both government and the citizens from the 2012 flood and Boko Haram activities in the North East of the country should serve as a lesson to government in particular to support any effort geared towards rescuing the people from the effects of flood and terrorism and establish them to forge ahead in life.

Foreign Insurers

THISDAY gathered that following the advent of these emerging risks; foreign insurers are trooping into Nigeria in search of such businesses to underwrite. This being the case, indigenous insurers should rise up to this challenge of fully participating in the underwriting of these risks.

For emerging risk like terrorism, Nigerian insurers should study the steps taken by their counterparts in experienced countries like America in order to get it right.

Reports from American terrorism insurance underwriters said that the September 11, 2001, terrorist attacks created a severe market shortage for terrorism insurance. As a result, the US Congress passed the Terrorism Risk Insurance Act, which created a federal “backstop” for insurance claims related to terrorism events in the US.

Analysts said since the Nigerian insurance regulatory body, National Insurance Commission (NAICOM) some years ago, signed technical agreement with its US counterpart, NAIC, it is expected that the commission should borrow a leaf from the guidelines on underwriting of emerging risk like terrorism which the American regulator has put in place and do the same in Nigeria so that underwriters venturing into the specialised business will be more focused and do the business in a way that will benefit both the industry and the insuring public.