Investors seek 3-yr timeline for recapitalisaion of insurance coys

Shareholders in the nation’s capital market have called on National Insurance Commission, NAICOM, to consider extension of the timeline for players in the insurance industry to comply with the recapitalisation exercise. They said that the one year timeline given by NAICOM is not enough and called for three to five years period. NAICOM had, in 2018, announced tier-based recapitalisation for the insurance companies with one year timeline to comply, but dropped the idea after shareholders challenged the process in court. The NAICOM, however, announced resumption of the exercise two months ago. Sunny Nwosu, Chairman Emeritus, Independent Shareholders Association of Nigeria, ISAN, speaking on the development, said though the recapitalisation would make funds available for the companies to pursue big ticket transactions, with just one year given, the operators run the risk of non-compliance and possible take-over by foreign firms.

With the previous investment of retail shareholders in insurance companies not yielding good returns, he said, it would be very difficult for shareholders to further reinvest in the sector. He stated: “Insurance sector is not a sector that shareholders admire so much and if shareholders fail to recapitalise, it then means that nobody will do the recapitalisation and these companies we have suffered to hold on our shares will be taken away from us and be given to their foreign friends and it is not agreeable to us. “If they are not going to give us 18 months to two years for recapitalisation, they should work towards using shareholders fund.”

Also speaking, Mrs Bisi Bakare, President, Pragmatic Shareholders Association of Nigeria, said there is need to exercise caution to avoid a repeat of the scenario that played out during the banking sector recapitalisation where many of the players hurriedly merged their operations just to meet up with the deadline. “In a hurry, many banks merged and today they are still having challenges. If the banks are still struggling, what do you think will happen to the insurance companies that have been given just one year? This is designed to fail; I don’t think we are going to get good result,” she said. Adeniyi Adebisi, ISAN National Chairman, stated that the exercise would give room for more take-overs by foreign investors and appealed for extension for the timeline. Under the recapitalisation exercise, insurance companies with composite licence will now need to upgrade their capital base from N5 billion to N18 billion to continue to underwrite life and non-life insurance businesses; Life insurance firms are required to increase their minimum capital requirement from N2 billion to N8 billion, while General insurance companies are required to raise their capital base to N1 billion from N3 billion. Reinsurance firms will now need N20 billion capital base to operate as against N10billion previously required. Existing insurance companies now have till June 30, 2020 to comply, while a new insurance firm will need to meet up the new capitalisation before it is issued a license to transact insurance business in the country. Vanguard