Insurance: Navigating Difficult Terrain in 2024

Insurance experts in their 2024 outlook said hard work and innovations are needed by insurers and their board members to navigate through difficult business terrain this year, Ebere Nwoji presents their views

As businesses kick off operations in 2024,  local and global insurance sector experts and analysts have peeped into the year  to paint a picture of what the year’s business climate will look like.

At both global and local insurance market arena, insurance experts, sector analysts said the coast is not too clear with a lot of upheavals dotting the business routes posing challenges to both insurance managers and their board members.

Kenneth Saldanha Senior Managing Director, Global Insurance Lead, highlighted five major issues that  the sector will expect this year.   

According to him, Property and Casualty insurance carriers is expected to slow to 2.6 percent on average for 2024 and 2025—down from 3.4 percent in 2023 (Swiss Re Sigma).

“Life insurance segment  is seeing stronger demand for savings and retirement products. In emerging markets revenue growth is expected to reach 5.1 percent on average in 2024 and 2025. This revenue growth may soften the impact of the ongoing profitability and liquidity challenges the segment faces, “he said.

On its part, Deloitte, in its insurance outlook for the year 2024 said future success hinges on insurance industry’s ability to be customer-centric. It said insurers must now evolve through digital and cultural transformation to address changes in their operating landscape and meet new societal expectations. Deloitte further said there will be escalating global risks – from climate change to cybercrime, adding that these are challenging the insurance industry’s capacity and readiness to react as society’s “financial safety net”.

The analysts viewed that the prevailing high inflation rate, refinancing and insolvency pressures,geopolitical and economic, social and governance issues (ESG) have spelt the need for directors and managers of insurance firms to  be prepared for these headwinds and have a strategy that can adapt when presented with a block to the business. 

They added that diversity in the choice of boardroom members for insurance institutions would allow companies to have varied approaches to such problems during the year. According to them, board  members and company executives can be held liable for an increasing number of scenarios. 

At the global insurance market arena,  insurance giant Allianz in its outlook for the new year published in the latest edition of its Allianz commercial journal,  noted that business outlook for the year is gloomy arguing  that since  the world eased out of lockdown from the Covid-19 pandemic, a new normal has not made daily challenges for companies any easier. In its analysis of business performance.

It said economic  growth across the globe remains disappointing. Business insolvencies are expected to rise by +10 percent in 2024, Inflationary pressures remain and refinancing of existing debt after years of low interest rates is a new test for many, resulting in  fresh pressure on cash generation, and decisions around how companies finance capital expenditure and manage their debt profiles.

considerable geopolitical risks

According to the report,  businesses and their supply chains face considerable geopolitical risks with war in Ukraine, conflict in the Middle East, and ongoing tensions around the world. Political risk in 2023 was at a five-year high, with some 100 countries considered at high or extreme risk of civil unrest.

Speaking, analysts Verisk Maplecroft, said this means  there is greater pressure and scrutiny on directors to ensure their company is adequately prepared to withstand the impact of business interruption in higher-risk territories, in addition to ensuring the safety of  employees.

The Allianz commercial report further noted that in 2024, regulators action or litigation risks due to ESG-related issues would be another major concern for boards members and management of insurance firms. This, it said, would be driven by increasing reporting and disclosure requirements around such topics, which could trigger claims in case of an inadequate response or non-compliance. 

“The number of countries introducing ESG-reporting mandates has grown considerably in recent years, exposing directors to costs to responding to investigations, enforcement actions, and potential fines and penalties, for suspected non-disclosure or misrepresentation. Such requirements also expose directors to claims by private litigants, not only for alleged misrepresentation but also due to dissatisfaction with what the required disclosures reveal about a company’s commitments to ESG issues. Recent examples of claims have included allegations of failure to manage climate risk to alleged breach of duties by investing in underperforming funds that actively pursued ESG strategies, ”it stated.

Here in Nigeria, investors in insurance stocks often accuse insurance managers of investing their money in unprofitable ventures and using their money to pay regulatory fines due to infractions resulting to regulatory fines.

They also accused insurers of not involving in claims reduction techniques that will reduce their risk exposure, meaning that managers use money that would have been paid to them as returns on investments to pay claims resulting from avoidable risks. Experts said this might  during the year see investors taking insurance managers to court as well.

Late last year,  the National Insurance Commission(NAICOM) shared the views of these global insurance market experts  on the need for insurance managers and director to be on their toes in the new business year to help in managing their companies’ businesses in a way that would  ensure continuity and avoid collapse that might  attract litigations by investors and other stake holders in the business.

NAICOM’s  business sustainability Training

The  regulator said it has started preparing the minds of board members of insurance firms on the enormous  work facing them in the new year as insurance directors.

The Commissioner for insurance Mr Sunday Olorundare Thomas in collaboration with the training arm of the industry, the Chartered Insurance Institute of Nigeria (CIIN) subjected the directors  to intensive training on business sustainability.

At the training, Thomas emphasised on the need for directors to be fully involved in the business activities going on in their various firms.

He noted that being a director and sitting on the board of an insurance firm is no longer business as usual adding that directors must contribute efforts towards ensuring the sustainability and continuity of their individual companies.

He challenged the directors to contribute towards institutionalising sustainability in their various business entities.  

In his key note address at the  conference, which has the theme,  “Driving Insurance Sustainability through Innovations and Performance: Directors’ Engagement,” Thomas explained that sustainable insurance entails conducting all activities in the insurance value chain in a responsible and forward-looking way by identifying, assessing, managing and monitoring risks and opportunities associated with environmental, social and governance issues. 

“My esteemed members of boards of directors of insurance institutions, the concept of insurance sustainability is no longer new to you all, however, what we should be discussing is how we will contribute to institutionalising sustainability in your various business entities, ”he said.  

Thomas explained that the  whole essence was to reduce risk, develop innovative solutions, improve business performance, and contribute to environmental, social and economic sustainability.

He noted that there was a growing awareness among consumers about the social and ethical dimensions of businesses, observing that customers were increasingly making choices based on the values and sustainability practices of the companies they engage with. 

“By aligning our business operations with ethical standards and contributing to the well-being of the communities we serve, we not only fulfill our societal responsibilities but also strengthen our brand and customer loyalty, ”the commissioner explained.

According to him, sustainable insurance as a concept could be an essential building block for sustainable development of the sector. 

He added that as policy makers, it was  important for the insurance directors who constitute the board members of the various insurance entities to understand how strategic policy decisions affected  the insurance business value chain. 

Sector’s Policy Structure

He further said it was also important for the policy structure of the insurance sector in Nigeria to understand that beyond insurance sustainability, insurers had a critical role in supporting organisations, “as they start their sustainability journeys by identifying and helping them navigate and manage new an emerging physical, transition and liability risks, such as supply chain interruptions, risks related to new technologies and delays to projects.”

However, insurance managers said they are optimistic about the new business year, adding that going by their performance in 2023, despite upheavals from various corners, the business coast in 2024 seem to be fairly hopeful.

According to the new Managing Director, Consolidated Hallmark Insurance Limited, Mrs Mary Adeyanju, going by the unaudited result posted by her company and other companies in 2023 their performance was much better than what they did in 2022.

She said her company was able to meet and even surpass its target in 2023 and going by plans, programme and strategies put in place,  business in 2024 would be better than 2023.

Though she could not point out indicators to show that this is possible, she was very optimistic that insurance is one of the sectors that will do well in the current year.

Managing Director, Universal Insurance Plc, Dr Benedict Ujoatuonu, had similar reasoning with global insurance sector analysts on ESG risks dominating claims that might land insurance directors and managers into problem with their investors.

According to him, insurance managers should acknowledge the fact that ESG risks and associated claims such as witnessed by insurers during the EndSARS protest  crisis can no longer be ignored.

He said masses demands on government due to governance issues would continue to be on the rise and where these could not be met due to failure on the part of government social unrest looms and property damages and claims on insurance firms will always emanate.