Insurance sector to shed 45% load over recapitalisation

Almost 20 per cent of the 100 registered insurance companies in Nigeria may go out of business, with about 25 per cent to be acquired.

Also, about 55 per cent may go for merger before the end of 2017, to remain in business, going by feelers from the sector.

This is to be part of the outcomes of the pending restructuring and recapitalisation programme in the sector, which was first mooted in 2015.

Already, tension has gripped many insurance companies, even as their workers and brokers express fear that the development might affect their work.

Sources at the regulator of the industry, the National Insurance Commission (NAICOM), say already most of the companies have started having talks bordering on merger and acquisition.

The commission had in 2016 reminded the operators that any of them with amount below the specified capital base of the sub-sector should be looking for either buyers or merging partners.

NAICOM stated that the N3 billion capital base for Life insurance business; N5 billion for General business, and N10 billion for Composite business is due for an upward review.

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This is to ensure the state health of the firms to emerge, as part of the ongoing restructuring of the industry.

It gave the end of the third quartet of 2017 as the deadline for all operators to comply with the directive by holding annual general meetings of the companies for the shareholders to be informed.

Also, inspectors from NAICOM have already commenced offsite verification on the insurance companies, which is part of the preliminary examination of the yearly reports by the supervisors based on their face values.

The Commissioner for Insurance, Mohammed Kari, confirmed that the need to have Nigerian insurance industry compete with their foreign counterparts had made the restructuring imperative.

“We will be fair but firm to all players, which is to be exhibited by the inspectors as they carry out their functions.

“The recapitalisation would be structured through the implementation of Risk-Based Supervision (RBS) framework, which would categorise underwriting firms into tiers of risk businesses to underwrite.

“Insurance companies’ capital base will now be dependent on the value or specific area of risks they carry as a business, different from what obtains currently where all the companies have the same statutory level of capital either as general or life business,” the Commissioner said.

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