No insurance company is going to fold in the ongoing recapitalisation exercise initiated by the sector's regulator, National Insurance Commission (NAICOM), according to Mr Simon Okeke, executive chairman of Purebond Insurance Brokers, who has over three decades' experience in the insurance industry.
In an interview with This Day, he notes that almost all the insurance companies have indicated their readiness to recapitalise.
He said, “In business, you don’t want to remain where you are. You want to be a line crosser and for you to do that, you must have the motivation to do bigger business. This move will motivate both local and international investors to bring funds into the industry.”
He says that he sees insurers raising funds through rights issues, IPOs or any other hybrid investment options.
He added, “Mergers may occur, but I don’t see acquisitions. I believe that the power of two is greater than that of one. If two companies, that have NGN10bn each, combine, they will raise NGN20bn and be more capable in doing larger risks and play in the upstream sectors of the oil and gas industry.”
The recapitalisation requirements are as follows: A general business insurer has to increase the minimum capital from NGN3bn to NGN10b; a life insurer from NGN2b to NGN8bn; a composite insurer from NGN5bn to NGN18bn and reinsurers from NGN10bn to NGN20bn. The deadline for compliance is 31 December 2020.
At least six out of more than 50 insurers operating in the country have expressed an interest in mergers.
Mr Okeke says that the implication of recapitalisation is that more business will be retained in Nigeria. There will also be more funds for operators to expand business, and settle all genuine claims which will in turn boost confidence among policyholders.