With just about eight months to the dealine set by the National Insurance Commission (NAICOM) for all insurance companiesin the country to recapitalizeor forfeit their licences, some shareholders in the entities are seeking an extension of the June 2020 date based on their findings as to the state of the financial capacity of the risk underwriting entities.
For instance, the National President, Constance Shareholders Association of Nigeria, Mr Shehu Mikail, was quoted by the News Agency of Nigeria (NAN) as saying that the nation’s economic situation has made it imperative for the industry regulator to shift the deadline in the interest of the nation’s economy.
He expressed optimism that if the economy improved then most of the companies would be better positioned to meet the recapitalization requirement and fulfil their obligations.
Mikail, who made a strong case for the extension of the deadline by at least six months, pointed out that while the initiative was laudable, the implementation based on the deadline could affect the growth of the insurance companies adversely if strictly adhered to by the industry regulator.
He explained: “Personally, I think it is good to have the recapitalisation to enable us have stronger insurance companies. But because the economy is not friendly at this period, most of the insurance companies would face this problem, as nobody is ready to invest their money.”
On the merger or acquisition options opened to the insurance companies, Mikail hinged the adoption of either option to the interest of the companies’ boards and the terms, conditions and interest of the parties going into such arrangements.
In his remarks, the National Coordinator, Progressive Shareholders Association of Nigeria, Mr Boniface Okezie, pointed out that the time frame issued for the recapitalisation was short thereby making it logical for the NAICOM to have a re-think on it.
While claiming that the industry regulator did not base its decision on public consultation, the investor said: “For us, it is a fire brigade approach that the regulators are adopting in the market, which is not helping the industry.”
Okezie, however, noted that it was good enough that the insurance companies had braced up to the challenge and were putting up plans to ensure that they continue in business through improved bapital base.
He said: “Many of them are either approaching shareholders to plan for the recapitalisation by increasing investment or their paid up capital so that they could bring in core investors.
“We are looking at money in bulk, and as it is now, the insurance cannot come as a way of Initial Public Offering (IPO) or Prospective Liability because nobody will buy among the existing shareholders, because it is a herculean task.
“Unfortunately, there is not enough money in the system, because people are just managing to make ends meet. Nobody is ready to put in the huge sum of money they require now to plan for recapitalisation,” he added.
It would be recalled that the NAICOM had in exercise of its statutory on May 20 this year revised the minimum paid-up share capital requirement for all classes of insurers, excluding Takaful operators and micro-insurance companies doing business in Nigeria.
By the directive which requires all existing insurance and reinsurance companies to comply with the new minimum capital requirements not later than June 30, 2020, the existing minimum paid-up capital share of Life Insurance business increased from N2 billion to N8 billion while General Insurance business was raised from N3 billion to N10 billion
In addition, Composite business was raised from N5 billion to N18 billion and Reinsurance business was raised from N10 billion to 20 billion.
The new regulatory regime also stipulates that the new paid-up share capital requirement takes immediate effect for new applications by companies seeking to carry out insurance business in the country.
