The Infrastructure Bank (TIB) is to partner operators in insurance industry to select Private-Public Partnership (PPP) projects to enable insurance companies make profits to meet long-term liabilities.
Its Managing Director, Mr Adekunle Oyinloye, said this at the on going 2018 National Insurance Brokers Conference and Exhibition, organised by Nigerian Council of Registered Insurance Brokers (NCRIB) in Lagos on Thursday.
Oyinloye said that enormous opportunities existed for insurance operators in infrastructure development and finance in Nigeria.
According to him, the Federal Government’s infrastructure blueprint named “the National Integrated Infrastructure Master Plan (NIIMP)” stipulated that an average of $25billion per annum is needed for the next five years to kick-start infrastructure renaissance.
According to the TIB boss, the $25billion is about seven per cent of the country’s Gross Domestic Product (GDP), adding that the NIIMP also estimated a total investment of $2.9 trillion to build and maintain infrastructure for 30 years forecast period.
“Presently, annual investments in infrastructure is estimated at USD $10 billion per annum, indicating a significant shortfall of US $15billion annually.” he said.
Oyinloye said that the shortfall indicated that government funding sources were inadequate to bridge the deficit.
“However, an estimate of USD $82billion in investments could be realised from the private investments and capital providers.” he said
He said that a key tenet of Nigeria’s infrastructure rebirth was an efficient financial ecosystem to ensure that private investments could be injected into the financing of infrastructure assets.
“The insurance industry has a critical role in de-risking such investments to ensure alignment amongst the various project stakeholders.
Oyinloye said that with the long-term nature of life insurance, retirement savings and pension annuities, the industry was positioned to participate in financing of PPP projects.
He said in today’s low-yield environment, underwriters were under increasing pressure to source additional investment returns.
“Infrastructure investments willingness present an opportunity for insurers to achieve the required yields to cover future liabilities and provide competitively priced products.
“Infrastructure investments are an interesting option for an insurer’s portfolio as they provide potentially lucrative risk-adjusted return on equity, long-term risk exposure which may provide a good match for long-term liabilities; illiquidity and sector-diversity.” he stressed.
Oyinloye said government’s intervention in the reviewing and strengthening extant legislations on insurance was pivotal
“The 2003 Insurance Act and the National Insurance Commission (NAICOM) Act of 1997 in particular required better implementation and enforcement.
“For instance, Section 64 of the Insurance Act makes compulsory insurance of building under construction which is more than two floors.
“The general implementation of the Insurance Act has left more to be desired also the limitation of liability on third party insurance is too small in line with the present day economy.
“Several sections of the insurance Act were badly implemented, we cannot overemphasize the need for an adequate legislation and policy to create operational environment,” he said.
The TIB boss said that the formulation of economic policies that would give room for investment would also help the insurance industry.
“As earlier stated, where there are investment friendly policies, insurance companies would also be able to make long-term investments for better returns on such investments.
“Also, if the economy is in a better shape, the prospective assure will have the liquidity to procure insurance, customer services in the Industry can be enhanced.” he said
