Insurance Sector for 2025 Outlook

Latest developments  in insurance sector  have  raised high hopes among insurers  that 2025 will be a year of good opportunities, writes Ebere Nwoji

As business operators in various sectors   open shops for start of another business year in 2025, insurance operators are starting the new year with  enthusiasm, high hopes and new dreams.

To the insurers, 2025 is a year of uninterruptible recapitalisation and renewed legislation that will dismantle every stronghold that has held the sector hostage against its growth and developmental dreams.

Their optimism in the new year is no doubt anchored on the passage, late in 2024,  of the Nigerian insurance  Industry Reform bill by the upper legislative house  and perhaps huge amount of N4 trillion allocation to infrastructural development by federal government in the 2025 appropriation bill which the presidency presented to the joint session of the National Assembly, shortly before proceeding on Yuletide holidays.

The insurers are optimistic that if the budget is passed into enabling Act, some portions of the infrastructural fund would definitely hit their vaults through insurances of those projects.

Insurers Source of Hopes

The insurers believed that with  the passage of the reform bill, going by the speed with which the present administration treats economic matters on its table, the bill will this time secure presidential ascent. They  also believe that once the bill gets ascent from the presidency, the insurance sector is good to go in its efforts to secure its  pivotal position  in the finance services sector of the economy .

According to the sector regulator, the National Insurance Commission (NAICOM), the  Nigeria Insurance Industry Reform Bill 2024, if signed into law, would unlock the growth, prosperity, and potential of the insurance sector. NAICOM is of the opinion that the passage of the bill by the National Assembly has already marked a significant milestone in the country’s efforts to revamp the insurance industry after nearly two decades. 

Describing the bill as a game changer for the Nigeria’s insurance industry that is going to have high positive impact on the contribution of insurance sector to the country’s GDP and economy as a whole, NAICOM said by consolidating existing insurance laws, the new legislation marks a new era in the ongoing efforts to strengthen the Nigeria’s insurance industry.

Highlights of the Bill

Key highlights of the legislation which ignited fire of hope on insurers in the new year and beyond include the enhanced capital requirements in the area of new minimum capital requirements for insurance companies, requiring insurance companies to be adequately capitalised to underwrite risks and protect policyholders. Risk-Based Supervision, strengthened consumer protection, streamlined regulatory framework among others. According to the commission, this achievement comes after years of operating with laws that have failed to keep pace with the country’s evolving economic landscape. This is unlike other sectors that have undergone multiple phases of legislative reforms to reflect current economic realities. With this hopes, insurers said the sky would be their limit in realising their dreams on the growth of the industry.

Already, even before the passage of the  bill by the law makers, some insurers have embarked on self recapitalisation by upgrading their capital from the present statutory level, which inflation and exchange rates have reduced to nothing, to a new level.

Nneed for recapitalisation

Presently, insurance firms’ minimum capital requirements stand at N2 billion for life underwriters, N3 billion for general business, N5 billion for composite firms and  N10billion for reinsurers. But in the new bill, the regulator is seeking to increase it to N10 billion for life underwriters, N15 billion,  for general business underwriters,  N25 billion for composite firms  and N35 billion for reinsurers. Both insurance managers and their regulator believe that if the insurance bill receives presidential ascent, the sector will be robust enough to underwrite some of the big ticket accounts that are often flown abroad due to low capacity of indigenous firms.

Indeed, both the operators and regulator  have come to agree that if there is anything the insurance sector needs most in the new business year, it is the recapitalisation exercise if the sector must continue to exist. Also, the industry  is determined  in the new year to make use of technology to block every loop hole through which business slip off operators’ hands.

The Chairman, Nigeria Insurers Assciation (NIA), Mr Kunle Ahmed, has said that the  association  would  through technology end the era of  claims fraud and controversy over claims payment between the industry and insuring public by exploring  the possibility of digital collation and tracking of claims payment to delight customers and reduce insurance fraud. Also, going by what the insurance commissioner said the industry will from 2025 cease from reflecting figures of unpaid claims in their accounts book.

Outside Nigeria’s shores, a peep into the insurance markets of other countries shows that similar difficulties and challenges  that faced Nigerian markets also obtains, leaving them with ernest search on how to make the difference in the new year.

Deloitte’s Outlook:

Deloitte in its outlook report on global insurance, especially the US market, said as risks become more complex and unpredictable and consumers more empowered, particularly with generative AI tools at their fingertips, insurers can no longer evaluate risks through the rear-view mirror. They should continue to evolve the way insurance works and how they interact with customers and distributors. 

The report noted that it  is becoming increasingly important for carriers to elevate technological and operational excellence, innovate product solutions and broaden the insurance value proposition—making the insurance safety net more reliable, accessible, and resilient. 

Deloitte said by modernising and streamlining infrastructure, operations and business models, insurers can develop a more forward-looking approach to risk modeling, assessment, analysis and mitigation.

“As insurers evolve their business models, it will be important to maintain trust with the customers and markets they serve. For example, after a period of consumer “sticker shock” from large non-life premium increases,  coverage pullback,  and fears of surveillance from advanced technologies, the industry may first need to rebuild goodwill among stakeholders to help support their objectives. Indeed, machine learning and AI can amass and analyse vast amounts and sources of data, but insurers should provide transparency and fairness to help make these approaches acceptable to consumers and regulators.”

It noted that amidst  this transformation, new tax rules are expected to present challenges and opportunities for insurance tax departments around compliance, including strategies around data collection, reporting, scenario planning, and corporate restructuring. 

It said, against this backdrop, insurers may also need to consider changes to pricing, cost optimisation, and M&A strategies in light of the erosion of tax benefits and uncertainty around the impact of new tax laws.

“As known risks escalate and unknown risks arise, insurers should remain a resilient source of financial security in an environment of change and uncertainty. This will likely require agile, innovative operating models and adoption of advanced technologies”

Outlook by Allianz

Global  insurance giant, Allianz Global Corporate & Specialty (AGCS) in its annual Directors’ and Officers’ insurance insights report taking a look into the new year alerted global insurance  directors and officers on the key risks trends in the year 2025.

The managers were cautioned on the risk that would  emanate from insolvency, geopolitical tension and ‘AI washing’ which insurance experts said would dominate other risky lines of business in the new year.

The experts said risks from these aforementioned areas were most likely going to pose serious challenge to directors, managers and officers of insurance institutions.

“Directors and Officers (D&Os), have been operating in a highly complex environment throughout 2024, and further volatility can be expected during 2025. Executives face multiple exposures in an increasingly interconnected business world, confronted with risks arising from business insolvencies, geopolitical upheaval, climate change, digital transformation, economic uncertainty, shifts in public opinion, and an evolving legal landscape”, said the Allianz report.

Chief Underwriting Officer, Allianz Commercial,Vanessa Maxwell, in the report said the  global rise in business insolvencies was a particular focus of concern, with companies and leaders exposed to potential claims from lenders seeking to recover funds, or from shareholders who allege breach of fiduciary duty. 

According to him, at  the same time, the litigation landscape and enforcement are increasingly stringent, and we are seeing regulatory bodies across the globe step up scrutiny of corporate conduct, making directors and officers more vulnerable to investigations, penalties and lawsuits.

He noted that global business insolvencies for 2024 were expected to rise by +11 percent and countries accounting for more than half of global GDP would  be hit by double-digit insolvency increases in 2025.

Judging by these experts’ views, in the year 2025, insurers have many challenges to contend with but opportunities are numerous for trusted, resilient technology driven and compliant operators.