As the September 17 date set by the National Insurance Commission to end review of insurance operators’ recapitalisation plans approaches, palpable tension has enveloped the industry, especially among those whose plans may not tally with their current financial position and weak public reputation.
Findings revealed that though the operators met the August 20 deadline set by the commission to forward their plans, it was, however, an easier task for companies with foreign interests as they were among the first batch to submit theirs.
This is an indication that their willingness to open up opportunities for foreign investors would eventually pay off as anxiety being nursed by some fully indigenous operators over the recapitalisation exercise has been put to rest.
During the recapitalisation exercise pronouncement by the regulator, it also directed that the firms submit their recapitalisation plan to the commission on or before August 20, 2019.
Findings revealed that while over 60 per cent of the industry operators struggled to work on their plans, firms with foreign interests led the pack of few that forwarded their plans even before the August 20 deadline.
The underwriting firms include AXA Mansard Insurance, Allianz Nigeria Insurance, SUNU Assurances, and FBNInsurance.
While reports on the recapitalisation plans are being awaited, series of developments in the last few weeks revealed that those opting to raise funds from the public and shareholders might be disappointed following the sector’s unimpressive performance at the capital market.
Recall that the regulator had called for a raise in shareholders’ funds from N2 billion to N8 billion for life insurers, N3 billion to N10 billion for non-life insurers, N5 billion to N18 billion for composite insurers while that of reinsurers should move from N10 billion to N20 billion.
To ensure decency during the process, NAICOM warned the operators from mixing up issues between their negative reserves and aligning the funds to the new recapitalisation requirement, stressing that they must clear up the negatives before seeking fresh funds to achieve their recapitalization bid.
The commission noted that the affected companies should shop for funds above the new statutory capital, stressing that “the shareholders’ fund as at the last date of recapitalisation for existing insurance/reinsurance companies shall not be less than the required minimum paid-up share capital.”
It explained that negative reserves amounted to depletion of the shareholders’ fund, hence operators must first raise their shareholders’ fund to the current statutory capital requirements.
According to 2017 financial year, negative reserves of non-life operators stood at N18.24 billion, while life operators was N11.13 billion and reinsurers, N27.29 million amounting to N29.64 billion.
The regulator had also implored operators to ensure their new capital is not a loan or margin facility whatsoever.
Speaking on their various positions to meet the June 2020 deadline, the firms’ management assured of their ability to either raise the new minimum shareholders’ funds or align with the traditional mergers and acquisition arrangement.
According to Managing Director/Chief Executive, Sunu Nigeria, Mr Samuel Ogbodu, the company has singled handedly perfected plans to meet the statutory minimum capital requirement as a general business underwriter.
He pointed out that with its continental spread, Sunu Group was poised to hit the top 10 insurance companies in Nigeria, adding that the company had come to stay in Nigeria with its focus in the retail market where it believes to carve a niche for itself.
Also stating his company’s position, the Chief Executive Officer, Consolidated Hallmark Insurance, Mr. Eddie Efekoha, noted that that the company was not averse to mergers and acquisition provided that the benefits from such acquisition align with the company’s corporate goals.
He said the company’s consideration of a merger was not necessarily because the required N10 billion can’t be raised, but because some organic and inorganic benefits can be accrued to the firm through the process.
According to the Managing Director, Royal Exchange General Insurance Company (REGIC), Mr Benjamin Agili, while speaking on its recent alliance with a German investor, InsuResilience Investment Fund, “our expectation going forward is that we will be able to meet the new capital requirements as set forth by the insurance industry regulator, the National Insurance Commission (NAICOM), increased market presence, leading to growth of our market share, introduction of new products, adoption and leveraging on technology to increase penetration.”