As controversy continues to trail the expected minimum capital for operators in insurance industry in future recapitalisation exercise, more than 70 per cent of insurance companies in the country are currently observing self-recapitalisation, LEADERSHIP can exclusively reveal.
Currently, the industry is still operating with a minimum capital of N2 billion for Life Insurance company; N3 billion for Non-Life Insurer; N5 billion for Composite Insurance company and N10 billion for Reinsurance firm, an outcome of 2007 recapitalisation exercise, amounting to 17 years ago.
Between then and now, LEADERSHIP findings show that there had been 3 recapitalisation setbacks as the exercises were suspended through litigation.
While a lot have changed in the fiscal and monetary policies coupled with inflation and forex crisis, that have made most local insurers worthless when dollarised, market observers were clamouring for the exercise.
Realising the urgent need to recapitalise despite initial setbacks, the insurance industry players came up with Consolidated Insurance Bill wherein the minimum capital was infixed but couldn’t be passed into law by the 9th National Assembly (NASS). However, a new Reform Insurance Bill, now before the National Assembly, has undergone second readings, and has prescribed a new minimum capital that the industry frowns at.
The proposed minimum capital requirements in the Reform Insurance Bill for Insurance and reinsurance operations put the minimum capital base for non-life business at N25 billion; non-life insurance business at N15 billion and reinsurance at N45 billion.
However, at the public hearing on the Reform Insurance Bill, insurance operators opposed the minimum capital base, thereby, proposing a minimum capital of N8 billion for life business; N10 billion for non-life and N20 billion for reinsurance as well as the implementation of Risk-Based capital regime that would enable them undertake risk inline with their capital. Currently, there is an ongoing discussion between the National Insurance Commission(NAICOM) and the Nigerian Insurers Association (NIA) to find a middle point to agree on.
As this controversy rages on, the individual player has commenced its recapitalisation exercise earlier enough since operators now realise recapitalisation is inevitable in the industry.
It was learnt that insurers, who have conducted their 2023 annual general meetings(AGMs) have briefed shareholders on the recapitalisation path they are embarking upon to meet what would be the outcome of the ongoing engagement.
AIICO Insurance Plc, Consolidated Hallmark Holdings (CHH), NEM Insurance Plc, Linkage Assurance Plc, Cornerstone Insurance Plc, Sunu Assurances Nigeria Plc, Anchor Insurance, among others, briefed shareholders at their recent AGMs.
Similarly, Universal Insurance Plc, Coronation Insurance, Capital Express Assurance, Rex Insurance, NSIA Insurance, Enterprise Life Assurance, and so on, had, in recent times, stated that they are working on increasing their capital bases to play dominant roles in the insurance industry.
Briefing shareholders at its recent 2023 AGM, the managing director/CEO, Cornerstone Insurance Plc, Stephen Alangbo, assured that the insurer is well positioned for any recapitalisation measures that may be introduced by the industry’s regulator, that is, NAICOM.
”We believe that this will enhance our financial stability , expand our underwriting capacity and allow us to invest in new technologies and innovative products. It will also help us attract top talent, deliver robust returns to shareholders, and support community development initiatives, while ensuring we provide greater values to all our stakeholders.
“We recognise the importance of Artificial Intelligence(AI) in strengthening our participation in existing value-chains. By integrating AI into our operations, we can further enhance our efficiency, improve customer experiences, and stay ahead in an increasingly competitive market,” he pointed out.
Similarly, the managing director/CEO, Sunu Assurances Nigeria Plc, Samuel Ogbodu expected the company to have been capitalised up to N50 billion in the next five years, stating that, the company already had its recapitalisation plans in place to ensure it meets up with whatever capital benchmark the insurance industry regulator, the National Insurance Commission (NAICOM) comes up with in future.
Meanwhile, a distinguished shareholder, Nona Awo, had advised the management of insurance companies to commence the process of recapitalisation now before the regulator announced it, saying recapitalisation would ensure that more funds are at the disposal of underwriters to invest in instruments that can bring good investment returns to players. This, he said, will allow insurers to meet up claims and financial obligations even as this will ensure shareholders get good values on their investments.
He advised underwriting firms to pay special attention to their investment portfolio, to ensure that returns on investments are good, hence, will trickle down to shareholders.
“Any company that has a good investment history will not have issues with payment of claims. I always advise insurance companies to ensure that they have good investment experts that will ensure the money invested comes out good,” he pointed out.
The chairman of NIA, Kunle Ahmed, while opposing the capital base in the bill, had, on behalf of the operators, suggested a minimum capital of N8 billion for life business; N10 billion for non-life and N20 billion for reinsurance.
The Nigerian insurance sector, he said, was not large enough to support the proposed increases in capital requirement without significant adverse effects, saying, ‘Insurance is an international business, and we need to consider what is obtainable in other countries, even within Africa.’
He cited Morocco, with a capital requirement of $5 million for life and non-life businesses, while Kenya’s requirements are $3.8 million for life and $2.3 million for non-life, saying, South Africa has the least capital requirements but has one of the biggest markets.
Ahmed noted that capital alone does not determine the capacity of an organisation or company. “I agree that it determines your retention, but it’s not the single determinant of your capacity. What we risk is that we’re going to have insurance companies that are not deepening insurance business in Nigeria, but are just sitting down and investing the money that they have in other things. I believe that we should focus a lot more on deepening insurance in Nigeria”, he said.
While some experts see recapitalisation as necessary going by the inflationary trends in the country and the ambitious $1 trillion economy by the federal government, they are worried that, with the opportunity given to the banks to return to universal banking, bankers would want to play big in the insurance space, stating that, most insurance companies may be caught in a web as bankers throw their weights behind the proposed capital.
