The National Insurance Commission (NAICOM) has defended its move to implement its recapitalization exercise as it hosts shareholders in the industry, in Lagos.
The Commission at the interactive meeting identified lack of liquidity as one of the primary purposes of the exercise as it is a major reason why the underwriters are not paying claims.
The Acting Commissioner for Insurance Olorundare Sunday Thomas, who was represented by the Director Policy and Regulation, NAICOM, Mr. Agboola Pius said that the last recaptalization of the industry was in 2006/2007 adding that the Commission in 2018 introduced the Tier-Based Minimum Solvency Capital (TBMSC) but according to him was attacked.
On the benefits of the exercise, he maintained that the recapitalization exercise will increase in retention capacity and conservation of foreign exchange earnings stressing that retention of local underwriters has been low “We intend to solidify the retention strength of the companies.”
Thomas, explained further that companies like Sahara Power which insures $3,171,035,000.00 takes 53.705 per cent of it’s businesses to foreign insurers, Dangote Refinery which insures $6,770,861,312.00 takes 71.569percent of it’s businesses to foreign insurers to mention but a few adding that the local insurers do not have the financial strength to cover 100 per cent of their businesses “the same way you take the risk out same way you take the premium out, when they are more solidified they can retain the risk,” .
Furthermore, he mentioned that the Commission intend to create high value, give hedge against risks arising from macroeconomic environment and the need for Capital restructuring.
On the Commission’s commitments he insisted that despite its low penetration in Nigeria, the potential of insurance is very huge assuring that NAICOM has decided to put more emphasis on market development to enable investors have value for their investment, Enforcement of compulsory insurance, IT Infrastructure in the insurance sector, availability of investment funds for a better and higher return, and above all, to enable companies to pay claims promptly.
He stressed further that there will be regulatory capital and better government oversight, and NAICOM will encourage other relevant distribution channels, not limiting to Brokers alone.
The acting commissioner further added that NAICOM will increase Insurance awareness campaign through advertisements, public lectures and social media to increase Insurance penetration in the country.
He also said that 80percent of the insurers subscribed for IPOs right issues, capitalization of retained earnings, however the commission suggest that merger, private placement remains a good route to achieve the capitalization.
On Merger he stated “the primary aim is not for companies to merge but if they have to merge, let it be, in 2007 companies like Custodian, NEM Insurance, Lasaco merged and they are not doing bad but can do better,” he said.
He said that 44companies plans for recapitalization has been approved
The Head of Department Financial Guidance and Corporate Governance, SEC Suleiman Alhassan in his own submission, assured shareholders that the commission will ensure the success of the recapitalization exercise “we will make sure that the Recapitalization exercise is successful and the investors will benefit from it,” he assured.