Chief executives of insurance companies and shareholder groups have condemned the National Insurance Commission (NAICOM) for increasing the capital base of life insurance companies to N8 billion; N10 billion for general insurers and N18 billion for composite firms. And for reinsurance firms, the new capital level is N20 billion.
Two days ago, NAICOM announced the capital increase via a circular – NAICOM/DPR/CIR/25/2019, titled “Minimum paid-up share capital for insurance and reinsurance companies”
mandating operators in the insurance sector to comply by shoring up their capital base in line with its directive on or before June 30, 2020 or forfeit their operating licence.
Yesterday, a prominent chief executive officer in the industry told Business Journal: “This sudden announcement of N10 billion capital base for insurance firms and N18 billion for reinsurance companies is very unfortunate because of the parlous state of the economy. How many shareholders and investors are willing to pump in such billions into an insurance sector that is still declaring Kobo, Kobo dividend?
This new round of recapitalisation will impact negatively on the industry both now and in the long run.”
Another CEO also quipped in: “What the industry needs now is more public awareness and adoption of insurance by Nigerians, not injection of billions of naira as capital base. The capital we have now is more than adequate to run the business. The fact that one or two insurance firms are experiencing challenges due to wrong management decisions in terms of investment is not a plausible reason to push the market into another recapitalisation process. I am really afraid of the future of this industry if things continue this way.”
And for shareholders, the NAICOM recapitalisation policy is an ill-wind that will blow negatively on the fortunes of shareholders.
Sir Sunny Nwosu, National President of the Independent Shareholders Association of Nigeria (ISAN), accused NAICOM of threatening the safety of the investment of shareholders in the sector.
Nwosu added that the industry does not need such high level of capital to operate profitably.