Feyisayo Popoola
The Nigerian Stock Exchange has forecasted an inflow of N200bn capital into the insurance sector post-recapitalisation.
The Chief Executive Officer, NSE, Mr Oscar Onyema, made this known while speaking during the NSE Insurance Sector Forum in Lagos on Tuesday.
He said it was estimated that there would be a 400 per cent increase in the minimum capital required for life insurance companies, 333 per cent for non-life insurance companies, 360 per cent for composite insurance companies and 200 per cent for re-insurance companies.
Onyema stated that the NSE would support insurance operators in their bid to meet the new capital requirement stipulated by the National Insurance Commission.
NAICOM had on May 20, 2019, issued a circular on the increase in the minimum paid-up share capital of all classes of insurers ― insurance and reinsurance companies ― with the exception of Takaful operators and micro-insurance companies, doing business in Nigeria.
The minimum capital base of life insurance companies was reviewed from N2bn to N8bn while that of general insurance companies was reviewed from N3bn to N10bn.
The capital base of composite businesses was reviewed from N5bn to N10bn and that of reinsurance business was reviewed from N10bn to N20bn.
NAICOM also barred regulated entities from borrowing money to meet their recapitalisation requirements, which leaves insurance companies with the options of merger and acquisition or capital raise by rights issue.
Onyema described the insurance sector as an important sector of the economy that was too significant to be neglected.
He, however, noted that, the challenges faced by operators in the sector were quite formidable as many licensed insurers were largely undercapitalised, thus limiting their ability to take on big ticket in-country risks as often required in the oil and gas, marine and aviation sectors.
He added that the insurance industry presented, perhaps, the most remarkable investment case of any industry in Nigeria despite present challenges.
Onyema said, “It offers numerous opportunities for enhancing the economic fortunes of the country and foreign investors seeing these opportunities are acting on it accordingly.
“An estimated capital of N200bn is expected to be injected into the Nigerian insurance industry post-recapitalisation. While I am optimistic that this directive by the industry regulator will enhance performance, bring about efficiency, innovation and profitability, the industry needs significant support to unleash its growth potential.
“With the ongoing recapitalisation exercise, we will encourage the insurance operators by providing a special window to fast-track the approval process.”
He stated that the process would only be made possible provided the operators had demonstrated high standards of corporate governance, deep social impact, high regulatory compliance and enhanced returns for their shareholders and post recapitalisation.
The Head of Research, Coronation Asset Management, Guy Czartoryski, said the Nigeria’s insurance industry was under-developed and lagged behind its African counterparts such as South Africa, Ghana, Kenya and Egypt with a penetration rate of 0.31 per cent and an insurance density of 6.2 per cent.
Czartoryski said though the insurance industry was poised for rapid growth, cooperation between regulators ― NAICOM and the Central Bank of Nigeria ― was critical.
He added that partnerships with banks, telecommunications companies and regulators, as well as the roll out of micro-insurance products to Nigerians, were needed to unleash the industry potential and thus deepen penetration level.
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