The National Insurance Commission (NAICOM) has listed the insurance business placed by 11 top corporations in 2018, in a bid to illustrate the need for recapitalisation in the insurance sector. In aggregate, more than 30% of the business was approved for placement in Europe and America due to the inability of local insurers to retain more of it.
The 11 companies are: the Nigerian National Petroleum Corporation (NNPC), Chevron Nigeria, Mobil Production Nigeria, Lafarge HOICIM, Dangote Fertilizer, Sahara Power (Egbin Power), Yinson, Stardeep Water Petroleum, Dangote Refinery, 11 Plc (formerly Mobil Oil), as well as Centre for Energy Research and Training, affiliated to Ahmadu Bello University, according to a report by the news site Vanguard.
NAICOM also said that Nigerian insurers, because of their low capital base, may lose 72% of the insurance business from the Dangote Oil Refining Company to foreign insurers. The insurance business of the company is $6.8bn, when the company becomes operational.
In addition, they might lose another $8bn energy insurance business from energy firms to foreign insurers also due to low capital and the lack of underwriting technical capacity, projected NAICOM.
According to a report by All Africa, NAICOM's director, of policy and regulation, Mr Pius Agboola, said the ongoing recapitalisation of insurance companies is to position the sector to independently handle big-ticket transactions in Nigeria as well as to end capital flight and support economic development of the country.
The insurance regulator has directed that existing insurers have to raise their capital by 30 June 2020. The required increase in capital varies, depending on which class of business an insurer undertakes. For instance, general insurers have to increase their capital to NGN10bn ($28m) from the current level of NGN3bn.
Deputy Commissioner for Insurance (Technical), Mr Sunday Thomas, said, “We want to prosecute this recapitalisation like never before. The whole idea of the exercise is to have an industry that is strong, that is diligent in prosecution of its assignments, that is highly liquid in terms of claims settlement, that is solid in terms of assets, and that is visible in terms of retaining business within our environment.”
However, industry analysts argue that it takes more than capital for insurers to retain more business at home. Other factors involved in considering insurance placement include treasury management, track record in the settlement of claims and strong corporate governance.