Global Investment Challenge to Nigeria Insurance: All You Need to know

Global Investment Challenge to Nigeria Insurance

Are you wondering what are the actual global challenges to Nigerian insurance industries? All you need to know are contained in this article;

Global investment is a pre-arranged guideline to obtain financial value or assets from any country in the world. It is the promotion of specialization and application of the principle of comparative advantages in the production of goods and services on a global scale so as to develop the whole world’s economic resources further.

These resources include human resources i.e skilled manpower that has helped the world in progressing scientifically and technologically. However, all these have helped to fasten the rapid and sustainable economic growth and developments.

The objective of global investment is to promote the diversification of the portfolio and the equitable sharing of risk among different market representatives of the world.

Meanwhile, the higher the rate of portfolio diversification, the lower the risk causing an increase in the value of one asset with an indiscriminate reduction in another.

What is Globalization?

Globalization: can be defined as the process by which economic creature, reshapes the general future of human beings and their daily economic activities to facilitate transparency in the movements of economic activities among the countries of the world.

Global investment: This can be defined as an investment strategy that has zero limits to geographical location.

Globalization has changed the manufacturing pattern in the world. for instance, a USA company is now established in Sri Lanka where you have low income but excess manpower in tailoring services.

The service sector to which the insurance industry belongs has always been global by its nature.

The marine business is a typical example. the truth is that any service that can be successful digested and transmitted can be produced and offered almost everywhere with the improved information technology in the developed countries of the USA, Europe, where economic and political integration has almost removed territorial boundaries, for instance, the formation of European single currency.

The major challenge facing most companies now is how to compete favourably in the global society. However, the global investment challenge to Nigeria insurance industries has played a significant role in promoting the application of the principle of comparative advantage in the production of goods and services on a global scale.

The following are some of the organizations established as a result of globalization:

i. IMF

ii. UNESCO

iii. IFAD

iv. UNICEF

Generally, Nigeria is a member of all these world bodies and can’t afford to be Island unto itself in matters relating to socio-political and economic activities that the globalization process requires.

Global Investment and Insurance

Insurance is a safeguard against the happening of unexpected losses or events. It is a device aimed at reducing the chance of a risk occurring when it happened to reduce the extent of its damage and provide the affected persons with compensation.

However, it is an investment challenge to all financial institutions including insurance sub-sectors to develop a strong base for an effective and efficient financial market.

The insurance industry needs to be organized and oriented to generate additional income for its cumulative premium revenues. At a company level, a well-structured investment department that can manage funds in accordance with national requirements and international standard is very vital.

The insurance industry must adopt marketing strategies and development in centres to enable the officers to generate progressive increases in premium revenue.

Based on this, companies will be running their activities on the law of large numbers and enjoy the benefits of economics of scale by minimizing the average variable cost.

When enough capital has been generated locally by the insurance company, it could be helpful in foreign oriented businesses, small or large industries or directly into foreign ventures, which could be used in foreign exchange.

It is based on this fact that enhances insurance companies offset the severe challenges of globalization.

Global Investment Challenge to Nigeria Insurance Industries

a. Most companies are desperate for and have developed the capacity of investment overseas or that of foreign investors who are desirous to start-up companies or to have a joint venture with insurance companies of Nigeria.

This type of business could be in cash or capital transfer {Assets}, sharing exchange or provision of technical expertise.

b. Insurance plays many roles in economic development in any economy through premium generation from policy-holder and mobilization of funds from the shareholders.

In all, investment of these funds in short term money markets and capital markets and other productive sectors of the economy as prescribed by law.

These funds mobilized have increased over time, and their presence is recognized by users of funds and financial intermediaries like merchant banks, Commercial banks and financial discount houses.

The funds provided by insurance companies for investments are as follows:

i. Short term funds which are made up of non-life premiums plus funds generated from marine, oil and energy insurance

ii. Medium funds from life and pension funds

iii. Long term funds from pensions fund and plough back profit i.e {retained profit}

Advantages of Globalization

1. It facilitates the promotion of business opportunities across the local boundaries. This enhances the turnover rate.

2. Globalization helps in building companies’ goodwill, as the companies’ image passes the national frontier.

3. It creates a reliable avenue for product diversification of plans.

4. Increase in the profitability and growth of shareholders fund.

5. Increased economies of scale.

Conclusion

Hence, the economic creature of globalization has helped to reshape the future of human beings as economic activities pass national boundaries limitlessly.

Insurance companies being a member of service industries invest their locally generated income which could be used in foreign oriented businesses and could promote foreign exchange.

It is in relation to this fact that insurance companies offset the investment challenges of globalization and create an avenue for transparent business in the near future.