Trade Wars, Insurance Risk: Gus Wiggle dissects Nigeria’s fragile position

As the global economy remains unsettled by trade tensions and tariff wars, Nigeria—an import-dependent economy, is uniquely exposed to the ripple effects.

Recent global tariff actions, spearheaded by the Trump’s administration have raised alarms across developing economies. While many discussions on the matter have focused on international diplomacy, manufacturing, and geopolitics, the implications for Nigeria’s financial services—particularly the insurance industry—have flown under the radar.

Gus Wiggle, principal and founder at Carefirst Consult, brings a wealth of insight into this conversation. An experienced managing director with a strong background in the insurance industry, Wiggle is well-regarded for his expertise in negotiation, business planning, corporate governance, and management. A graduate of the Lagos Business School, he has a track record of strategic leadership and navigating complex regulatory and economic landscapes.

In this exclusive interview with JOY AGWUNOBI, Wiggle offers a compelling analysis of how global tariff wars and international trade disputes could directly and indirectly impact Nigeria’s insurance sector. From the risk of increased claims in marine and fire insurance to the broader consequences on investment portfolios and reinsurer relationships, his insights reveal the extent to which global economic volatility could threaten the stability of the local industry.

Wiggle also spoke about the preparedness gaps within Nigeria’s insurance landscape, the evolving role of regulators, and the need for insurers to adopt advanced risk management frameworks.

What are the most immediate risks Nigeria’s insurance industry could face if global trade wars escalate?

The tariffs unleashed on imports from nearly all the countries of the world including the poorest of the poorest by the Trump government until it was paused few days back was already posing significant risks to Nigeria’s insurance industry as in other parts of the world which was going to create a disruption to economic growth, decreased trade volumes and also increased cost of imported goods, thereby reducing profitability of organisations and the purchasing powers of individuals.

The immediate risk to Nigeria would have been devastating because we import nearly everything. The supply chains would have been disrupted which can lead to higher claims for insurers especially such classes as fire insurance and marine insurance. It’s not unlikely the trade wars would have increased the risks of cyber-attacks, and data breaches, particularly in industries that rely heavily on digital systems. This could have led to higher claims for insurers, especially in lines such as cyber insurance. Additionally, the availability and cost of reinsurance may have been affected by global trade wars, potentially impacting Nigerian insurers’ ability to buy coverage profitably.

The tariff war would have contributed to a climate of economic uncertainty and market volatility. This uncertainty may have affected insurers’ investment portfolios, potentially impacting their overall profitability.

The consequences of the trade wars caused by the tariff regimes globally would have had far-reaching effects on the Nigerian insurance industry and I am not sure if we would have come out of it unscathed.

How do you assess the potential economic impact of a global tariff war on Nigeria’s import-driven sectors, and how do you see trade credit and marine insurance being affected?

I heaved a sigh of relief when the potential trade wars that would have been caused by global tariff war and which would have significantly impacted Nigeria’s import-driven sectors, more because we never prepare for such scenarios until they occur.

Imagine what the tariffs on imported goods would have caused to a nation that is still trying to manage the inflicted high cost of living by the removal of subsidy and floating the Naira currency and Band A electricity tariff that has led to higher prices for consumers, exacerbating Nigeria’s already high inflation rate of 11.3 per cent. leading to increased costs for businesses, and reducing the take-home of the working class or reducing profit margins and competitiveness of organisations.

Our manufacturing industries wouldn’t have been immune because we rely heavily on imported raw materials and machinery, which would have faced increased costs same with the agricultural sector, which accounts for 21.1 per cent  of Nigeria’s GDP, would be been affected by higher costs of imported fertilizers, machinery, and other inputs same for Nigeria’s petroleum sector, which still rely on imported refined petroleum products thanks anyway to Dangote, it would have been worse, they would have faced increased costs and potential shortages.

Trade credit and marine insurance providers would have needed to reassess their risk exposure in Nigeria, potentially leading to higher premiums or reduced coverage which would have impacted on cost of doing business.

The increased risk and uncertainty associated with trade wars would have led to reduced trade finance options, making it more challenging for businesses to access capital.

Again, because tariffs can be implemented or revoked quickly as has happened though temporarily (for 90days), this has already, caused economic uncertainty and was already making corporate planning difficult, trade credit insurance and political risk insurance was already been triggered due to instability by some suppliers and could have resulted in an unwillingness by importers to pay or provide goods or services thereby imparting on both Trade Credit and Marine insurances.

In what ways could Nigeria’s insurance industry be indirectly impacted by global supply chain shocks?

Our reinsurance premium is usually adjusted at the beginning of the renewal year which is usually at the beginning of the year, this does not stop the reinsurance to come up with fresh terms and therefore make availability and cost of reinsurance limited, making underwriters to adjust pricing and fresh terms associated with global supply chain shocks.

But more specifically, global supply chain shocks can lead to reduced economic growth, which can impact the demand for insurance products because the pocket is lean.

Another indirect impact is inflation because when the supply chain is disrupted, it will lead to increased inflation, which can reduce the purchasing power of individuals and businesses, potentially impacting their ability to afford insurance which may no longer be a priority.

I know global supply chain shocks can also lead to changes in consumer behavior, which can impact the demand for insurance products as needs will override wants.

Overall, global supply chain shocks can have far-reaching impacts on Nigeria’s insurance industry, and insurers will need to be proactive in managing these risks to remain competitive and solvent. It’s times like this you know those who have prepared to be in business.

In your view, what is the biggest gap in preparedness among Nigerian insurers for this emerging global risk?

The truth is that, we never prepare for anything in this part of the world but we are masters in reactionary, we fix whatever is happening around the world so easily with minimal damage. I guess it is just our culture in this country and therefore not limited to just the insurance industry alone. We react well to global challenges or risk but albeit too late sometimes.

Having said that, I want to commend the current leadership in NAICOM, as they continue to drive change in the Nigerian landscapes. That notwithstanding, Nigerian insurers still face significant gaps in preparedness for emerging global risks, because many insurers in Nigeria are still struggling to implement effective ERM practices, which are crucial for identifying, assessing, and mitigating risk. This gap leaves some of them vulnerable to emerging global risks.

I am not certain if all the Nigerian insurance industry has comprehensive operational risk management frameworks, making it challenging to address emerging risks such as supply chain disruptions, this is just my view.

May I suggest here that the industry leverages data analytics and artificial intelligence to support informed decision-making to anticipate and respond to emerging risks whenever they occur and not be caught hands down.

I am aware NAICOM is updating or improving on the regulatory framework governing the Nigerian insurance industry and hope it will address emerging risks and ensure that insurers are adequately prepared.

By addressing these gaps, Nigerian insurers can enhance their preparedness for emerging global risks and maintain their competitiveness in the industry, just my view again, since you asked for my view on the question. 

What would you advise insurers to start doing to mitigate potential losses from global trade volatility?

Let me start by suggesting that insurers develop specialized products to cover trade credit and political risks, providing businesses with protection against non-payment and other trade-related risks provided they can get adequate reinsurance  program for this specialized product and invest in advanced data analytics and monitoring tools to track global trade trends, identify potential risks, and adjust their underwriting and pricing strategies accordingly where they can but again this could be capital intensive so they should be able to weigh the opportunity against the benefit.

Though this may sound more academically, Insurers can leverage data analytics and artificial intelligence to better understand global trade trends, identify potential risks, and optimize their underwriting and claims processes, but I don’t think we are here yet, I may be wrong.

I want to believe that by implementing these strategies, our Nigerian insurers can reduce their exposure to potential losses from global trade volatility and provide businesses with the protection they need to navigate an increasingly complex and uncertain trade environment.

Is NAICOM taking any steps to assess or prepare for global trade tensions and how they might affect insurance providers?

I may not know what NAICOM is currently putting in place to prepare the market for the global trade tensions but as much as I know the current leadership of the regulator, they would have commenced steps to strengthen the insurance industry’s resilience through various regulatory measures, this is not to say there have not been framework in place before now if we consider that NAICOM had issued the Corporate Governance Guidelines for Insurance and Reinsurance Companies (CGGIRC) in 2021, which emphasises risk management, disclosure requirements, and whistleblowing policies to promote transparency and accountability.

The Risk Management Framework guidelines also require insurance companies to establish a risk management framework that addresses material risks, including market risk, credit risk, operational risk, and reinsurance risk.

Finally, while NAICOM’s regulations don’t directly address global trade tensions, what they have presently can contribute to the industry’s overall resilience and ability to respond to emerging challenges.

Do current risk assessment frameworks used by Nigerian insurers consider global macroeconomic disruptions such as tariff wars?

I may not be able to answer this in the affirmative, however I want to believe that some insurers may have begun to incorporate these risks into their assessments, but many others may not have current risk assessment frameworks to fully consider global macroeconomic disruptions such as tariff wars we are now exposed to. This could just be as a result some Insurers lack of access to reliable data and analytics to accurately assess the potential impact of global macroeconomic disruptions on their business

I came to this conclusion because many Nigerian insurers focus primarily on domestic risks, with limited consideration of global macroeconomic disruptions like the tariff wars unleashed on the world.

Are there any regulatory updates being considered to support insurers in absorbing potential global trade shocks?

I want to believe that there are Regulatory updates that can support insurers in absorbing potential global trade shocks like enhancing the Risk Management Framework which emphasizes the need for insurers to develop robust risk management frameworks to address emerging risks.