Recapitalisation: Insurance shareholders urge NAICOM to consider extension of June 2020 deadline

Shareholders of some Insurance companies on Monday urged the National Insurance Commission (NAICOM) to review its recapitalisation directive issued to the insurers, saying that the June 2020 deadline did not seem feasible.

They made the submission while speaking with the News Agency of Nigeria (NAN) in Lagos.

Mr Shehu Mikail, the National President, Constance Shareholders, Association of Nigeria, told NAN that there was a need for an extension of the June 2020 deadline, as it did not seem feasible due to the present economic challenges.

Mikail said that once the economy improved, the directive could be implemented by the end of 2020.

He said that while the initiative was laudable, there could be problems with implementation, as the present time frame and procedure could affect the growth of the insurance companies.

“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,” he said.

Reacting to the option of merger or acquisition by the insurance companies, Mikail noted that the interest of the board of the insurers would determine the possibility of such partnership.

He said that mergers or acquisitions were good options in order to solidify the system, but were dependent on the terms, conditions and interest of the parties going into such arrangements.

Mikail advised the insurance associations to intervene and liaise with the regulatory commission to consider an extension of the deadline.

“As a shareholder, I cannot take up any high risk to invest more money in the sector because the system is not conducive; it is better I maintain my status quo which I am still earning to have a backup for future purpose,” he said.

Also, the National Coordinator, Progressive Shareholders Association of Nigeria, Mr Boniface Okezie, complained that the time frame issued for the recapitalisation was short.

Okezie expressed disappointment that the regulator did not consider public opinion and complaints of the shareholders before taking the decision.

“For us, it is a fire brigade approach that the regulators are adopting in the market, which is not helping the industry,” he said.

Okezie, however, said it was good enough that the insurance companies had braced up to the challenge and were putting up plans to ensure that the deadline was met.

“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 said.

According to him, a lot of the insurance companies are now looking for foreign investors, while soliciting shareholders’ approval for the partnership.

The Association’s National Coordinator said that it was good that some of the foreign investors still had faith in the Nigerian Capital Market and so there was rush for the demand for the partnership.

Okezie said that the foreign investors had shown interest because they knew that at the end of the exercise, the insurance companies would come out stronger and better.

He said that an option of merger and acquisition between the companies could also not be ruled out, as long as they were compatible institutions that could align in their business ideas.

“As long as the collaboration between the companies would make them a stronger brand and give the shareholders leverage on what they need, the shareholders would give their approval for the partnership.

“All hands are on desk because no company wants to lose or have its licence withdrawn, and that is why assiduous plans have been put in place to meet up with the deadline,” he said.

According to him, the merger was still a better option, rather than allowing foreign investors, as this might deny some of the insurance companies from being limited companies and quoted in the capital market.

Okezie said that the government should as well have have looked into compliance with insurance policies to strengthen the companies, rather than recapitalisation.

“Why should insurance companies acquire such huge fund when they are not banks, and do not deal with cash transaction.

“What insurers do is to sell a product and take the money to the banks for investment.

“With this new policy, most of the insurance companies that would remain standing at the end of the exercise could even acquire the banks and not the banks acquiring them.

“How many of the over 15 million cars in Lagos alone are insured, and there is also no compliance to the story buildings Insurance policy as prescribed by government.

“The regulators should look into this and ensure compliance so that the insurance companies could make more money and be more stable, rather than recapitalisation,” he said.

NAN 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 – 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 N10 billion to 20 billion.

The new paid-up share capital requirement took immediate effect for new applications made to NAICOM by companies seeking to carry out insurance business in Nigeria.

However, existing insurance and reinsurance companies were required to fully comply with the new minimum capital requirement not later than June 30, 2020. (NAN)