Insurance companies are appealing to the National Insurance Commission(NAICOM) to waive the first phase of its segmented recapitalisation for the insurance and reinsurance companies scheduled to end by December 31, 2020.
Managers of insurance firms, who spoke during a meeting of insurance companies’ CEOs with the commissioner for insurance, Mr. Sunday Thomas, at the industry’s professional forum in Abeokuta, Ogun State recently, urged the regulatory body to consider their challenges by amending some of the requirements in the recapitalisation exercise in the sector.
They said the support of the regulator would assist to build strong underwriting companies and boost investors’ confidence in the sector.
Some of the executives, who attended the meeting, disclosed that they made a request for the recapitalisation exercise process to be concluded in December 2021, while the interim milestone assessment scheduled for December be stepped down.
The operators observed the huge impact of COVID-19 on the financial services sector and the national economy at large, coupled with the situation that was worsened by losses from the nationwide #EndSARS protests.
“The waiver will give the insurance and reinsurance companies more time to settle back to business and pursue their full recapitalisation programme in order to meet the commission’s set objectives by 31 December, 2021,” an anonymous operator said.
Speaking at a conference in Lagos recently, the chairman, Mutual Benefits Assurance Plc, Dr. Akin Ogunbiyi, said, insurance is a business of pools, hence, no serious need for industry-induced recapitalisation, stating that, players should be allowed to recapitalise individually according to the risk they want to absorb.
Moreover, he said, the ongoing recapitalisation exercise is also creating opportunity for foreign investors to take over local underwriting firms for a peanuts, especially, with the volatility in the forex market which favours dollar at the expense of the Nigerian Naira.
“Most of these investors are coming in with dollars and will buy these companies in Naira term while using the current share price, which is already a disadvantage to local underwriters,” he stated.
Stressing that the coronavirus pandemic has affected negatively, the ability of insurance companies to raise funds to recapitalise ahead of time, he called for more time to allow the industry outgrow the impact of the pandemic, by giving more time to them to recapitalise.
Financial assets such as debt and equity instruments as well as money market and equity funds, he said, are returning low yield, and that as a result of the prevailing not too favourable investment climate, capital preservation yields are not as profitable as before.
With inflation at 13.9 percent, he said, one loses money in real terms, even as, the fixed income may guarantee cash flows, but profitability is negative.
“How then do we guarantee adequate return on investment in the Insurance Industry? Can the new regulatory-induced recapitalization guarantee it? If the worth of a company is a function of its performance, will there be a positive correlation between recapilisation, growth and profitability?” he queried.
To him, “we can achieve adequate return on investment and capital adequacy ratio through support and patronage of the Nigerian Insurance industry by government at all levels and reduction of sharp practices to its barest minimum. We can accumulate retain earnings and shareholders funds on a sustainable basis through good corporate governance and adaptive leaders that recognize and respond to insurance needs and relevant adjacencies.”
It would be recalled that NAICOM extended the deadline for insurance and reinsurance companies to meet its new capital requirements to September 30, 2021 from December 31, 2020.
NAICOM also mandated that 50 per cent of the minimum paid-up capital for insurance and 60 per cent for reinsurance must be met by 31 December 2020.