Barely 10 weeks to December 2020 deadline given to insurance companies to comply with first phase of the industry recapitalisation requirements, companies are tightening their belts to avoid sanctions that may follow non-compliance.
Some of the Insurance companies yet to meet the 50 percent paid-up capital requirement set by the regulator in the first phase are increasing their efforts to conclude with their capital raising plans, particularly those embarking on private placements.
BusinessDay investigation also shows that some others that may not likely recapitalise on their own are in deep discussion with merger prospect partners, with due diligence activities going on, which must be agreed on with the National Insurance Commission (NAICOM) before end of October 2020.
The last-minute rush, according to industry analysts, is to avoid being restricted from participating in certain classes of business, as 2021 insurance renewals are gearing for a start.
From October/November each year, insurance companies across the globe begin firming up renewals for new business year, lobbing brokers on new accounts and consolidating on existing business.
NAICOM in its circular to insurance and reinsurance companies issued in March 2020 titled, ‘Segmentation of Minimum Paid up Share Capital Requirement for Insurance Companies in Nigeria,’ noted that Insurance Companies that failed to satisfy the required minimum paid-up capital by the end of December 31, 2020, might be restricted on the scope of businesses they would transact.
The Commission had on June 3, 2020, extended compliance deadline of the ongoing recapitalisation exercise in the industry to September 30, 2021, with first phase to end December 31, 2020.
NAICOM expects insurance companies to recapitalise 50 percent of the paid-up share capital by end of 2020, and reinsurance companies 60 percent, while the remaining 50 percent and 40 percent, respectively, will be completed by end of September 2021.
According to the Commission, any insurance and reinsurance company that fails to meet the first phase of the capitalisation by end of 2020 may be restricted on the scope of business they will transact.
The segmentation shows life companies operating currently with N2 billion will increase to N4 billion by December 31, 2020, as first phase and to N8 billion by September 30, 2021.
General business companies operating currently with N3 billion will increase to N5 billion by December 31, 2020, as first phase and to N10 billion by September 30, 2021; Composite business companies operating currently with N5 billion will increase to N9 billion by December 31, 2020, as first phase and to N18 billion by September 30, 2021, while Reinsurance companies operating currently with N10 billion will increase to N12 billion by December 31, 2020, as first phase and to N20 billion by September 30, 2021.
Sunday Thomas, commissioner for Insurance/CEO, NAICOM, had said during the 2020 Economic Outlook held in Lagos that the Commission would avoid as much as possible going into liquidation of failed companies in the ongoing insurance industry recapitalisation.
Thomas said then that rather than liquidating those that fail to recapitalise, the NAICOM was considering a forced merger that would make them become one big company.
NAICOM may apply regulatory forbearance to ensure it does not go through that rout at the end of the recapitalisation exercise, Thomas said.
According to Thomas, the role of the regulator in the recapitalisation is to ensure that there is transparency and certainty of the process, orderliness and level playing ground for all players.
