MANY Nigerian insurance companies are set to establish subsidiaries in Ghana with imminent opportunities awaiting the insurance industry through the discovery of oil.

Speculation is rife that about three or four more companies will join the train before the end of the year.

While IGi Insurance, the largest insurance firm in Nigeria, acquired Network Assurance Limited at the beginning of this year, Equity Assurance Ghana Limited launched its operations some two weeks ago.

Apart from these two, three companies with South African participation, one with French participation and three other companies with Nigerian participation have opened their offices in Ghana.

Four years ago when the Central Bank of Nigeria (CBN) raised the minimum capital requirement of banks to N25 billion (about $ 181million) from about N2 billion ($14.5 million), it culminated in the extension of business to Ghana by some Nigerian banks in order to mobilize more deposits.

Today as many as about five banks including UBA, Intercontinental and Zenith banks have all created subsidiaries, rolling out several branches across the country and in the process, bringing competition to the banking industry, and making the financial sector the most lucrative.

UBA is noted for bringing democratization into the banking industry.

Insurance plays an important role in every economy as it provides security for the country and its people so the surfacing of the foreign insurance companies such as Regency Alliance Limited, International Energy and Capital Express is a welcome development.

The National Insurance Company (NIC) should also be commended for separating life insurance business from general portfolio since the passage of the new Insurance Law 2006, Act 724.

It is presently engaged in discussions to raise the minimum capital requirement of the firms from $1 million to $10 million.

“Can't we take a cue from Nigeria, our neighbors who have pegged their minimum capital requirement at $16 million so as to consolidate the industry and take advantage of the numerous advantages that the discovery of oil will bring to the country than to allow foreign insurance companies to bully us?”, Ken Ofori, an astute investment banker and co-founder of Databank Financial Services Limited told CITY & BUSINESS GUIDE in an interview.

The Vice President, Alhaji Aliu Mahama at a recent meeting urged insurance companies to work assiduously towards attracting the attention of Ghanaians into buying insurance products.

According to him, Ghana is fast becoming a middle-income country and therefore with the national economy and investment respectively experiencing growth, coupled with the country's recent oil find, “demand for high quality insurance products is bound to increase.

“I wish to observe that in many ways the insurance sector is still a virgin industry in this country with a huge undeveloped market.

Until the advent of the national insurance scheme, insurance was alien to a large section of our population.”

Ghana's insurance penetration currently stands around 1.60 percent and this has been described as very low compared with Cote d'Ivoire's figure of 5 percent, Namibia's 8 percent and 16 percent for South Africa.

All Ghanaians are therefore being encouraged to embrace the emergence of these foreign insurance companies especially from neighbouring Nigeria since their presence will not only heighten competition but promote regional integration.

The consolidation of the sector will also increase its contribution to the gross domestic product (GDP) which presently stands at two percent. Source: Daily Guide - Daily Guide