• Wednesday, May 22, 2024
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Insurance recapitalisation threatened by Coronavirus

Insurers move to help government avert contract failures, project abandonment

If the coronavirus pandemic ravaging the global economy is not contained within the next two months, fears are that the ongoing recapitalisation in the nation’s insurance industry might suffer some set back.

The reason is that major meetings that could give go ahead to pursue the exercise, including Extra Ordinary General Meetings, board meetings and conferences are being cancelled as a result of the pandemic.

All of these may delay the exercise and affect companies wishing to raise funds from different sources.

Fears are also that operators may ask for extension of time if the pandemic affects their time table and ability to conclude the exercise before the deadline of December 31, 2020.

Few weeks back, some CEO’S who commented on the development were worried that that this might mean so much for the industry.

“I am worried about the current fall in oil price, as well as coronavirus, and hope it does not lead to another recession, because if it does, then we will have problems in the ongoing recapitalisation exercise, an Insurance CEO said.

“We are headed for another recession; this is my biggest worry now, another insurance CEO.

Insurance industry in Nigeria is going through a recapitalisation exercise that will require operators shore up their paid-up share capital to as much as 300 percent.

The exercise, which commenced on 20th May 2019 and to end on 31 December 2020, requires that life companies increase their paid-up share capital 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.

Swiss Re Institute had stated a week agao that it’s expecting to see a global recession in 2020 as the coronavirus outbreak continues to cause major disruption around the world, putting pressure on already weak economic resilience.

Swiss Re analysts noted that the recession will likely be mild in a historical context, although economic growth will likely decelerate quite abruptly in Japan and the Eurozone, including in Italy,

France and Germany.

“We expect a global recession with economic risks having intensified abruptly,” said Jérôme Haegeli, group chief economist at Swiss Re.

“Fact is: the coronavirus is hitting the global economy when economic resilience is already weak to start with.”

The US and China are forecast to remain more resilient, although the risk of both a US recession and a China hard landing has risen to a very high 40 percent.

Swiss Re also foresees further monetary easing, but said that central bank action will need to be coordinated with forceful fiscal expansion to be effective.

It noted that few fiscal measures have been proposed thus far outside of Asia, with coordination among the G7 countries most likely if the situation deteriorates further.