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Allianz Nigeria to enter cyber insurance market as work-at-home raises risks

By David Whitehouse
Posted on Wednesday, 17 February 2021 20:32

REUTERS/Michaela Rehle

Allianz Nigeria is planning to roll out a cyber insurance policy, since working at home raises the stakes in cyber security.

Discussions with regulators are close to reaching a conclusion and the policy is likely to be available before the end of the first half of this year, Allianz Nigeria CEO Adeolu Adewumi-Zer tells The Africa Report.

A risk barometer published by Allianz based on a survey of 193 Nigerian corporate respondents shows cyber incidents as the second-biggest perceived risk in 2021, second only to Covid-19. A year earlier, cyber incidents were only seen as the eighth-biggest risk.

Working at home due to Covid-19 has pushed cyber risk up corporate agendas, says Adewumi-Zer, who took over in September and is the first female CEO of Allianz Nigeria.

Many processes that were still manually performed in Nigeria have had to be digitalised in a hurry. The new policy will cover areas such as data loss and reputational risk as well as cyber crime, adds Adewumi-Zer. “This is not going away when Covid ends. The world has changed.”

Greater reliance on cloud computer servers that are accessed over the internet is one result of people having to work at home. A study of IT managers by Sophos in 2020 found that 86% of respondents in Nigeria had experienced public cloud security incidents in the previous year, putting it second only to India in the world. More Nigerian organisations had suffered from having public cloud data exposed than in any other country.

Insurance penetration

Adewumi-Zer points to low incomes and lack of trust as the factors holding back Nigeria’s insurance penetration, which lags behind most of Africa.

  • About 40% of the population lives on less than $2 a day, and only about a quarter of Nigeria’s population could afford to buy a basic insurance product, she says.
  • The development of trust in insurance is constrained by low levels of financial literacy and a culture of reliance on the family, adds Adewumi-Zer.
  • Compulsory insurance is one way to increase penetration, she says.
  • Third-party motor insurance is mandatory, yet some get around it by buying fake insurance certificates to show to the police, explains Adewumi-Zer. And some ultra low-cost policies may provide a paper document but little or no cover in case of an accident.
  • Improving the government’s car registration database to make it more complete would be a “key step” to better enforcement, she says.
  • Fire and personal liability insurance for property owners and tenants could also be made obligatory, she adds.
  • Allianz is also working on adapting an international health insurance policy to be sold in Nigeria. The policy is likely to be available at the end of this year or the start of 2022, she says.

Consolidation

The fragmentation of the Nigerian insurance industry is often seen as a barrier to penetration. Adewumi-Zer “hopes and expects” that the eventual prospect of higher capital requirements for insurers will lead to a process of industry consolidation. This would also reduce the need for domestic insurers to rely on international reinsurance capacity, she adds.

Following a court order in December, the National Insurance Commission has announced the suspension of the implementation of the increased requirements, which had already been delayed.

Allianz, which has already provided the capital to meet the requirements, will keep its “eyes open” as to the possibility of taking part in this consolidation, Adewumi-Zer says. “It’s always a possibility. It’s tough to say no.”

Bottom line

Nigeria’s dire economic performance – which has been weakened by the impact of the Covid-19 on the oil industry and wider economy – means that niche areas such as cyber security may provide growth for the insurance sector.