By Rukayat Adeyemi
Lagos – The National Insurance Commision (NAICOM) on Tuesday said it had approved the recapitalisation plans of 44 out of the 54 Insurance companies in Nigeria.
Mr Agboola Pius, Director, Policy and Regulation, NAICOM, said this at an interactive session with shareholders to update them on the 2019 recapitalisation directive, in Lagos.
Pius said that the commission had also rejected the recapitalisation plans of six insurance companies and directed them to make amendments.
He said that the plans of two companies were also under review, while two companies had not submitted any plans at all to the commission.
According to him, there are possibilities for the insurance firms to still review their capital restructuring plan and resubmit for approval, but within a reasonable time frame.
Pius said that the commission saw the need for the recapitalisation to increase the retention capacity and conservation of foreign exchange earning of the insurance companies.
“The retention capacity is the maximum amount of risk retained by an Insurer per cover and the capital size of an underwriter.
“When the insurance companies are well solidified, they can retain most of the risk in the country,” he said.
The director said that the commission had also given a guideline on the capital restructuring of the insurance firms, which refers to the option the firms choose to finance their assets and investment, except borrowing.
He listed the options as: Initial Public Offering (IPO), right issues, capitalisation of retained earnings and other means such as private placement, merger or acquisition.
According to him, while the intention of the recapitalisation directive by NAICOM is not for companies to merge, if the option would be to the benefit of the shareholders, then so be it.
“In 2005/2007 recapitalisation, about four companies merged to become Custodian Vantas Kapital, two companies merged to become LASACO, two companies merged to become Linkage.
“Three companies merged to become NEM, and two companies merged to become Consolidated Hallmark, among others.
“These companies are not doing badly, but can still do better, so consolidation is done to make companies better and not to destroy them,” he said.
The NAICOM director assured the shareholders that the commission had developed appropriate framework to ensure that their investments were secured during the exercise.
He said that the measures put in place include a directive to the insurance companies to deposit the recapitalisation fund in the Central Bank of Nigeria (CBN) Escrow account, which cannot be withdrawn without NAICOM directive after a time frame.
Pius highlighted some of the benefits of the recapitalisation to include High Value Creation to limit borrowing, enabling of better strategic planning and reduction in cost of capital with proper oversight.
He said it would also lead to increase in liquidity and Investment funds, Hedge Against Risk arising from Macro-Economic environment, among others.
Responding, a shareholder, Mr Adeniyi Adebisi, Coordinator, Independent Shareholders Association, urged NAICOM not be hostile and antagonistic in its regulatory approach.
Adebisi also charged the commission to give an ample time frame, dialogue, engage with all stakeholders and fashion out ways of addressing the deteriorating economy.
Mr Shehu Mikali, National President, Constance Shareholders Association, also said the problem with the recapitalisation was not from the insurance firm or shareholders, but from the government.
Mikali said that there was need for proper cognisance amongst the regulators, as this was affecting a lot of things which need to be addressed.
“If the government can reason and put the round peg in the round hole, there won’t be any problem, ” he said.
The News Agency of Nigeria reports that NAICOM, in exercise of its statutory powers and regulatory functions, on May 20 reviewed the minimum paid-up share capital requirement for all classes of insurers, i.e Insurance and Reinsurance companies.
The directive was with the exception of Takaful operators and Micro-insurance companies doing business in Nigeria.
Following the reviewed minimum capital requirement, the existing minimum paid – up capital share of Life Insurance business was reviewed and raised from N2 billion to N8 billion.
General Insurance business was raised from N3 billion to N10 billion, Composite business was raised from N5 billion to N18 billion and Reinsurance business was raised from N10billion to 20 billion.
The new paid-up share capital requirement takes immediate effect for new applications made to NAICOM by companies seeking to carry on insurance business in Nigeria.
However, existing insurance and reinsurance companies are required to fully comply with the new minimum capital requirement not later than June 30, 2020.