Analysts see global tariff tensions unsettling Nigerian insurers

Joy Agwunobi

As major economies drift toward a full-scale tariff showdown, with retaliatory duties being fired like economic missiles, ripple effects are being felt far beyond the trading floors.

In Nigeria, analysts warn that the country’s heavy dependence on imports makes it particularly vulnerable to the aftermath of these global trade tensions, which could disrupt not only trade volumes and business profitability but also erode consumer purchasing power—ultimately threatening the resilience of the country’s already pressured insurance industry.

The growing wave of protectionist policies sweeping across the United States, China, the European Union, and other leading economies is now unsettling global trade flows. What began as bilateral disputes over tariffs has since spiraled into a widespread economic standoff.

The United States and China, in particular, have introduced hefty import duties on each other’s goods, with Europe and other key players responding in kind. These tit-for-tat measures are unsettling global supply chains, commodity prices, investment sentiment, and economic growth projections.

While the broader impact of trade wars is widely understood to affect exporters, importers, and manufacturing sectors, a less visible but equally critical area at risk is the insurance industry.

Industry professionals argue that insurance, often seen as the quiet enabler of commercial activity—may bear the burden of disrupted global commerce, especially in countries like Nigeria, where the economy is highly import-driven and insurance penetration is still developing.

From marine insurance for transporting goods across oceans, to trade credit coverage for cross-border transactions, and even policies safeguarding businesses from operational interruptions, they noted that Nigeria’s insurance industry is closely intertwined with the health of global trade. As tariffs drive up the cost of imported goods, the cost of doing business increases, and with it, the complexity and volume of insurance claims.

Gus Wiggle, founder and principal consultant at Carefirst Consult, expressed deep concern over the potential fallout of global tariff wars and supply chain disruptions on Nigeria’s import-reliant economy, warning that such global events could pose significant risks to the country’s insurance sector.

Wiggle explained that the cascading effects of trade disputes and disrupted supply chains could hinder economic growth, reduce trade volumes, and increase the cost of imported goods. These outcomes, he said, would ultimately weaken organisational profitability and erode consumers’ purchasing power, all of which are critical to the stability of the insurance market.

“Nigeria imports nearly everything. Any disruption in global supply chains would directly affect us, triggering a spike in claims for insurers, especially under classes like fire and marine insurance,”Wiggle stated.

He also pointed out that global trade tensions could escalate cyber threats and data breaches, particularly in sectors dependent on digital infrastructure. This, he noted, would drive up claims in cyber insurance lines.

“Reinsurance availability and cost would also be impacted,” he added, emphasising that if global reinsurers face challenges, Nigerian insurers may struggle to secure cost-effective coverage.

On the financial side, Wiggle warned that economic uncertainty and market volatility spurred by trade wars could destabilise insurers’ investment portfolios, thereby affecting their profitability. He noted that providers of trade credit and marine insurance would be forced to reassess their risk exposure in Nigeria, which could result in higher premiums or reduced coverage—ultimately increasing the cost of doing business.

In addressing the preparedness of Nigerian insurers, Wiggle emphasised the ongoing challenges faced by the industry, stating, “We never prepare for anything in this part of the world, but we are masters in being reactionary. We respond to global challenges or risks, though sometimes too late.”

Wiggle pointed out that Nigerian insurers are still grappling with significant gaps in their preparedness for emerging global risks. “Many insurers in Nigeria are struggling to implement effective Enterprise Risk Management (ERM) practices,” he explained.

These practices, essential for identifying, assessing, and mitigating risk, are vital for ensuring that insurers are well-equipped to handle emerging global challenges. This gap, Wiggle noted, leaves some insurers vulnerable to these risks.

One of the core reasons for this, he noted, is that some insurers do not have access to reliable data and analytics that would allow them to assess the potential impact of these global disruptions on their businesses. Instead, many Nigerian insurers remain focused primarily on domestic risks, with limited regard for broader global economic challenges.

Wiggle recommended that Nigerian insurers adopt data analytics and AI to enhance decision-making and anticipate emerging risks. He also advised developing specialised insurance products for trade credit and political risks, supported by strong reinsurance programmes, to boost industry competitiveness and preparedness for global challenges.

Similarly, Ononiwu Chukwuma Anosike, an insurance broker and digital insurance advocate, highlighted  the economic consequences of the United States’ proposed 14 percent tariff on Nigerian exports, warning that the move could trigger a new wave of inflation and significantly disrupt both the national economy and Nigeria’s already fragile insurance industry.

Citing trade data from 2024, Anosike noted that Nigeria’s total exports to the U.S. amounted to $6.29 billion—primarily petroleum products and their extensive derivatives—while U.S. exports to Nigeria stood at $4.2 billion, cutting across various sectors. According to him, the tariff will upend this bilateral trade dynamic, leading to a drop in Nigeria’s export earnings, with effects across multiple layers of the economy.

“The proposed tariffs will not only reduce our export inflow but will also undermine the implementation of the 2025 national budget. This will impact the monthly Federation Accounts Allocation Committee (FAAC) disbursements to states and local government areas. In the face of dwindling revenues, the federal government may be forced to widen the tax net and introduce more aggressive tax measures to stay afloat,” Anosike said.

Beyond the macroeconomic implications, he underscored the ripple effect on Nigeria’s insurance sector—particularly in areas tied closely to international trade. Anosike explained that tariffs of this nature, though largely rooted in international economics and trade politics, would have far-reaching consequences on global risk management systems, especially in the realm of special risk insurance categories.

He stated,“Special risk covers such as marine cargo, marine hull, aviation cargo, aviation hull, and global goods-in-transit insurance are deeply dependent on robust global supply chains and stable international business cycles. The imposition of tariffs will introduce delays and cost escalations across these chains, leading to immediate adjustments in the insurance ecosystem.”

According to Anosike, Nigeria’s insurance sector, which is still at a developing stage and heavily reliant on imports, will feel the shockwaves almost instantly. He predicted a surge in premium rates for special risk policies, and a corresponding increase in claims payouts for both insurers and reinsurers.

He added, “The implications will extend to business interruption and consequential loss insurance products, where insurers will see more claims arising from disrupted supply chains caused by tariff-induced shipping and logistics delays.”

In motor insurance, Anosike pointed out another layer of impact. As importation of vehicle parts becomes more expensive due to tariffs, the cost of claims under motor insurance—especially for stolen or accident-damaged vehicles that are deemed total losses—will rise sharply.

“These types of claim scenarios will become more common in Nigeria, unlike in countries with strong local automobile industries such as Japan, China, South Korea, and Morocco. As a result, motor insurance premiums—across both comprehensive and even third-party plans—are bound to increase in the long term.”

Anosike further lamented that the Nigerian insurance sector lacks the technical depth to adequately prepare for such emerging global risks. He pointed to the shortage of professionally certified actuaries as a major weakness, especially in areas of proper risk assessment, risk-based pricing, and premium sustainability.

“Since the liberalisation of financial services under universal banking, the industry has suffered from unhealthy competition leading to reckless rate-cutting. This has weakened the capacity of insurers to honour claims in full and on time,” he said.

To build resilience, Anosike advised Nigerian insurers to focus on growth opportunities in retail and health insurance. He recommended the creation of youth-focused, affordable insurance products, particularly those targeting corps members and other underinsured demographics.

He also urged the National Insurance Commission (NAICOM) to proactively engage the looming challenge through regulatory foresight and international collaboration.

“NAICOM must convene a strategic retreat to brainstorm viable options. It should also seek cooperation with regulators in other import-dependent economies while studying the best practices adopted by countries that are not reliant on imports,” he suggested.

Anosike further emphasised the need for NAICOM to conduct a thorough review of insurers’ risk assessment frameworks, especially in the context of ongoing macroeconomic shocks.