February 23, (THEWILL) — Foreign exchange (FX) losses have wiped out much of the profit growth recorded by insurers in 2025, as currency depreciation offset gains from stronger underwriting performance and rising premium income.
The insurance industry posted a combined pre-tax profit of ₦215 billion in the first nine months of 2025, up 18 percent from ₦182 billion recorded in the same period of 2024. However, FX losses of ₦76 billion, nearly triple the ₦27 billion reported a year earlier, significantly eroded bottom-line gains.
As a result, net profit growth slowed sharply to just 4 percent year-on-year, settling at ₦124 billion, compared to ₦119 billion in the corresponding period of 2024.
Gross written premiums rose by 22 percent to ₦1.14 trillion, up from ₦935 billion in 2024, driven by higher rates in oil and gas, aviation, and motor insurance segments. Life insurance premiums increased by 19 percent, while non-life business grew by 25 percent.
However, the sharp depreciation of the local currency, which weakened by approximately 32 percent against the US dollar between January and September 2025, increased the cost of foreign-denominated claims and reinsurance obligations.
Reinsurance expenses climbed by 28 percent to ₦310 billion, while net claims expenses rose by 24 percent to ₦640 billion, partly reflecting higher settlement values on dollar-linked policies.
Although insurers recorded a 15 percent increase in investment income to ₦198 billion, largely from higher yields on fixed-income securities, unrealised FX valuation losses on foreign currency assets weighed on earnings.
Industry capital adequacy ratios remained above the regulatory minimum at an average of 165 percent, but analysts warn that sustained currency volatility could pressure solvency margins if not actively hedged.
Analysts expect insurers’ full-year 2025 profit growth to remain modest at 3–6 percent, unless exchange rate stability improves in the final quarter.
“Underwriting margins are improving, but FX exposure remains the biggest swing factor for earnings”, a Lagos-based insurance analyst said.
Going forward, insurers are expected to deepen currency risk management strategies, including better asset-liability matching and selective hedging, to protect earnings from further volatility.
Ogochukwu Onwaeze is a writer specializing in business and economic journalism. At THEWILL News Media, she translates market trends, financial developments, and policy shifts into clear and engaging stories.
