‘Weak insurance sector poses risks to banks, financial stability’

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Business analyst, Chika Mbonu, says Nigeria’s weak insurance sector is not only limiting economic growth but also exposing banks and the wider financial system to greater risks.

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Speaking on Arise News on Tuesday, Mbonu said insurance is a critical foundation for banking because many of the assets and securities held by financial institutions depend on adequate insurance coverage.

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“Insurance is a very important part of the economic system. Without strong insurance, the banks are also affected because many of their securities rest on insurance,” he said.

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He explained that despite its importance, Nigeria’s insurance penetration remains below one per cent of GDP due to low public trust, poor awareness, weak product design, distribution challenges and concerns over claims settlement.

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According to him, many Nigerians believe insurance companies collect premiums but fail to honour claims, discouraging households and businesses from purchasing policies.

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Mbonu said strengthening the insurance industry would improve confidence, protect bank-backed assets, support lending activities and provide greater stability for sectors such as mortgages, aviation, oil and gas.

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He backed the National Insurance Commission’s recapitalisation exercise, saying stronger capital requirements would create more financially resilient insurers capable of paying claims and supporting economic activities.

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“If insurance companies are more capitalised, it will reduce those who just go and collect premiums and never pay claims,” he said.

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Mbonu also called for stricter enforcement of compulsory insurance policies, noting that fake insurance certificates continue to weaken the industry’s credibility.

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Commenting on the Central Bank of Nigeria’s 2025 financial statements, he said the apex bank should be assessed by its ability to maintain price stability, strengthen confidence, manage reserves and support economic growth rather than by accounting profits alone.

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He added that while publishing the financial statements marked a significant step towards transparency, Nigerians would ultimately judge the CBN by improvements in inflation, the value of the naira, employment, borrowing costs and confidence in the banking system.

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