The National Insurance Commission (NAICOM) has approved the recapitalisation plans of 44 out of the 54 insurance companies in Nigeria.
Mr Agboola Pius, NAICOM’s director for policy and regulation, revealing this information on 29 October, said that the Commission had rejected the recapitalisation plans of six insurance companies and directed them to make amendments while those of two are under review and the remaining two have not submitted any plans, according to a report by News Agency of Nigeria.
NAICOM had on 20 May, announced increases in the minimum paid-up share capital requirements for all classes of insurers in a bid to strengthen their retention capacity.
The minimum capital of general insurance businesses is raised to NGN10bn ($27.6m) from NGN3bn. The minimum capital for life insurers is raised to NGN8bn (currently NGN2bn); composite insurers, to NGN18bn (currently NGN5bn); and reinsurers, to NGN20bn (currently NGN10bn). The new paid-up capital requirements take 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 by 30 June 2020. Existing insurers and reinsurers had been directed to submit their recapitalisation plan to NAICOM by 20 August.
NAICOM has also said that to increase the minimum capital, insurers can resort to initial public offerings (IPO), rights issues, capitalisation of retained earnings, private placements, as well as merger or acquisition.
NAICOM has also revealed that six insurers have indicated interest to merge their businesses in order to meet recapitalisation requirements.
Mr Pius said that most of the 44 companies, whose recapitalisation plans were approved, prefer to raise funds through rights issues and IPOs. He said that private placements would be the best option.
However, Mr Sulaiman Alhassan, a director in the Supervision Department of the Securities and Exchange Commission, said though Nigeria was in need of foreign direct investment, SEC’s regulation would not allow more than 30% investment in any insurance company via private placement. According to him, this policy is to give Nigerians the opportunity to invest in the firms.