A major policy directive that may thinker the current structure of the Nigerian insurance industry is the ongoing recapitalization of the industry.
This current development, which from all indication will look difficult for many insurance companies due to paucity of funds in the economy, may end up swallowing fringe players.
According to analysts, raising money from the capital market this time is a huge task, an could be more tasking for those that still have a long way to go or have not been paying dividend to its shareholders.
Interaction with some insurance players in the industry weekend at the Business Journal 2nd Annual Lecture held in Lagos with the theme ‘Digital Nigeria: The Path to Sustainable Economic Growth’, show that business combination may be the only way out.
According to them, since the regulator is not likely to shift ground on either the amount or time frame, the only alternative is to look for bed fellows and do business combination, Kunle Ogedemgbe, finance analysts said.
The Nigerian insurance regulator, NAICOM had in a circular issued on Monday May 20, 2019 announced increase in the paid-up share capital of life companies from N2 billion to N8 billion; General Business from N3 billion to N10 billion; Composite Business from N5 billion to N18 billion; and Reinsurance companies from N10 billion, to N20 billion.
According to the Commission, the minimum paid-up share capital requirement shall take effect from the commencement date of this circular (May 20, 2019) for new applications, while existing insurance and reinsurance companies shall be required to fully comply not later than 30th June 2020.
NAICOM also on July 23rd, 2019ina circular titled: “Re: Minimum Paid Up Share Capital Policy for Insurance and Reinsurance Companies,” signed by Pius Agboola, director, Policy & Regulation Directorate, NAICOM stated that the recapitalisation plan should include among others, capital status of the companies as at the last audited financial statements; board resolution on how to comply with the directives, and detailed action plan on how the funds for the recapitalisation are to be sourced with timeline and deliverables.
The circular also directed that companies intending to seek funds from the capital market were required to submit their plan of action on a file-and-use basis, just as, “companies that intend to merge or acquire another should submit their proposal after which they must comply with Section 30 and 31 of the Insurance Act 2003.”
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