Notwithstanding the losses incurred after last year’s flooding in some cities, Nigerians, especially homeowners are yet to embrace property insurance in the country.
Currently, the property insurance market faces hard times, as many Nigerians have failed to recognise risks associated with homeownership.
It is a mandatory requirement by Section 64 of the Insurance Act, for all buildings of more than two floors under construction to be insured.
The Guardian gathered that most public buildings in Nigeria are not insured thereby leading to loss of life and property without remedy.
Section 65, sub-section 3 of the Insurance Act 2003, requires the owner or occupier of every public building to be insured against liability for loss or damage to property or death or bodily injury caused by collapse, fire, earthquake, storm or flood.
The 2003 insurance Act defines a public building as one to which members of the public have access to for educational, recreational, medical and commercial purposes. The penalty for non-compliance is a maximum fine of N100, 000 or one-year imprisonment or both according to insurance Act 2003.
Section 64 of insurance Act 2003 stipulates that for insurance of buildings under construction, every owner or contractor must take an insurance policy to cover liability against construction risks caused by his negligence or that of his servants, agents or consultants, which may result in death, bodily injury or property damage to workers on site or members of the public.
The Federal Government announced recently that 2022 flood in various parts of Nigeria led to an estimated economic loss of $9.12 billion (N4.2 trillion as at official exchange rate of N460.78/$).
Natural disasters were an increasingly common occurrence in 2022, there’s no sign the weather will slow down. This poses a challenge to the property insurance market that’s still grappling with losses. Experts revealed that the hazards affecting the property insurance market include catastrophic weather events, like flooding and theft.
The key findings of the flood assessment stated that the 36 states and Federal Capital Territory were affected by the 2022 flood with varying degrees of damages and people affected. The number of persons affected rose above 4.9 million as of November 25, 2022, with significant damage to infrastructure, including roads, irrigation and river, as well as electricity projects, with around $1.23bn ($0.959 – $1.724bn) in damage expected.
“This analysis estimates that the total direct economic damages, based on currently reported statistics as of November 25, 2022, are in the range of $3.79bn to $9.12bn, with the best (median) estimate at $6.68bn.
“This includes damages to residential and non-residential buildings (including building contents), as well as damages to infrastructure, productive sectors and to cropland.”
According to Allied Market Research, the global property insurance market was valued at $15,897.8 billion in 2021, and is projected to reach $38,708.5 billion by 2031, growing at a CAGR of 9.5 per cent from 2022 to 2031.
The global property insurance market has witnessed stable growth since the COVID-19 pandemic owing to the economic slowdown, unpredictability in global financial sectors, and highly volatile market. Investors witnessed immediate effects on their current portfolios as a result of the pandemic, which also had an influence on insurance companies.
Property insurance industry provides insurance for renting and coverage that protects against loss from theft, fire and other perils for tangible assets and equipment of businesses or residences. It includes, all-risk coverage insurance that offers protection from all risks. In addition, property insurance policies normally exclude damage that results from a variety of events, including tsunamis, floods, drain and sewer backups, seeping groundwater, standing water, and a number of other sources of water.
It stated that increase in digital transformation among industries and the rise in penetration of internet and mobile devices across the world boost the growth of the global property insurance market size. In addition, growing need for finance among businesses and individuals to house insurance positively impacts the property insurance market growth.
Experts confirmed the development, however, they added there are demands for the product in commercial property. “There is low patronage for grade A office developments in commercial developments but still a high demand for retail. Grade B office Developments are gradually having a greater demand,” according to the former chairman, Lagos branch of the Nigerian Institution of Estate Surveyors and Valuers (NIESV), Rogba Orimalade.
“This is quite common in residential property. A lot of homeowners are very much aware of home insurance. However, there is this lukewarm attitude to it because of the impression that it’s expensive to insure property, as people hardly look at the loss to be avoided.
“There has to be deliberate attempt to enlighten the public about the dangers of not insuring the buildings. Insurance is still relatively new for most people and more enlightenment is required,” he said.
A past Chairman of the Property and Facility Management Faculty of NIESV, Stephen Jagun, said foreigners than more than Nigerians and corporate, as well as religious organisations also undertake valuation of their permanent assets or properties for insurance purposes.
Jagun, who revealed that 95 per cent of Nigerians don’t know that they can insure their properties, called on the insurance industry to engage on enlightenment, advocacy and publicise their success stories.
The Managing Director, Guinea Insurance Plc, Mr. Ademola Abidogun, told The Guardian that the problem with the compulsory property insurance had been lack of enforcement and awareness.
While pointing out that the product is one of the cheapest in the industry, Abidogun said if there had been a lot of fire incidents, people would have taken it serious.