Wednesday, December 11, 2019 / 04:17 PM / By NSE/ Header Image Credit: NSE
Protocol List and Greetings:
1. The Ag.
Director General, Securities and Exchange Commission - Ms. Mary Uduk
represented by Mr. Abbas Abdulkadir, Deputy Director/Head Securities &
Investment Services
2. The
Acting Commissioner, National Insurance Commission - Mr. Sunday Thomas
represented by Mr. Agboola Pius, Director Policy and Regulation
3.
Executives
of Insurance Operators
4.
Members
of the Stockbroking Community
5.
Distinguished
Ladies and Gentlemen
On behalf of the National Council and Management of
The Nigerian Stock Exchange (NSE), I am delighted to welcome you to this
Insurance Sector Forum. We are pleased to host this forum as it is part of our
strategic efforts towards supporting the insurance sector, especially at this
pivotal time of recapitalization.
I must thank our sponsors; Coronation Merchant Bank
and Cordros Capital - for committing resources to host this event. I would also
like to thank our distinguished speakers and guests for making out time to be
here today.
As you are aware, The National Insurance Commission
(NAICOM) recently announced the upward review of the minimum paid-up share
capital requirement of insurance and reinsurance companies. The ongoing
recapitalization and consolidation exercise is expected to significantly impact
the industry and equally present new opportunities in M&A as well as
private equity and public offerings.
The Nigerian Insurance industry has grown remarkably
over the years, generating a Gross Premium Income (GPI) of ₦448.6
billion in 2018, reflecting a 12% growth from 2017. The industry also recorded
an increase in its asset base by an estimated sum of ₦1.3
trillion as at December 31, 2018, reflecting a 17% Compound Annual Growth Rate
over the last three years. According to the National Bureau of Statistics, the
Insurance sector recorded a nominal growth rate of 6.69% and a real GDP growth
rate of 3.96% in Q3 2019 from 4.48% in Q2 2019 and 1.03% in Q3 2018.
Although this data indicates a positive outlook in the
Nigerian insurance industry, the reality and headwinds faced by operators in
the sector are quite formidable. Many licensed insurers are largely
undercapitalized, thus limiting their ability to take on big ticket in-country
risks, as is often required in the oil & gas, marine and aviation sectors.
As at Q3 2019, the insurance sector contributed less
than 1% to the Gross Domestic Product (GDP) of Nigeria. 3Having a penetration
rate of 0.31% and an insurance density of 6.2%, the Nigerian Insurance Industry
still lags behind its African counterparts - with South Africa having a
penetration rate of 14.7%, Kenya 2.8%, Ghana 1.1% and Egypt 0.6%.
The insurance industry presents perhaps the most
remarkable investment case of any industry in Nigeria and despite present
challenges, it presents numerous opportunities for enhancing the economic
fortunes of this country. Foreign investors, recognizing these opportunities
have acted accordingly with the likes of AXA, Prudential, Liberty, Swiss Re,
SUNU Group, Saham Group, taking strategic positions in the industry.
An
estimated capital of ₦200billion
is expected to be injected into the Nigerian insurance industry
post-recapitalization with a 400% increase in the minimum capital required for
life, 333% for non-life, 360% for composite and 200% for re-insurance.
While I am optimistic that this
directive by the industry regulator would enhance performance, bring about
efficiency, innovation and profitability, the industry needs significant
support to unleash its growth potential.
At the NSE, we see close parallels
between this recapitalisation and that of the banking sector in 2005. The
immense growth seen in banking industry in large part can be attributed to
successful capital raised through the capital market. The crucial question
before us is unravelling how to replicate similar successes within the
insurance space and leverage the platform of The Exchange to successfully raise
rightsized capital to fuel accelerated growth.
The NSE provides a platform to
support listed corporates to meet their business objectives whilst also
implementing strategic initiatives that have improved investor confidence. This
has allowed listed companies to be positioned on the Exchange as attractive
investment opportunities.
We have worked assiduously over the
years in ensuring positive impact to the private sector and more importantly
our listed companies through policy advocacy and strategy execution efforts.
The NSE continues to engage the Federal Government on tax incentives for listed
companies and exemption relating to investments in the capital market. We are
delighted to note that we have made some strides in our discussions, some of
which are evident in the proposed amendments to The Finance Bill 2019, which
has now been passed by both Houses of the National Assembly.
With the ongoing recapitalization
exercise, we will encourage the Insurance operators by providing a special
window to fast-track the approval process, provided the operators have
demonstrated high standards of corporate governance, deep social impact, high
regulatory compliance and enhanced returns for their shareholders. Post
recapitalization, we look forward to having our first insurance company listed
on the Premium Board of the NSE.
Once again, I welcome all our guests
to this interactive session. I encourage you to participate fully in the
discussions, as this would catalyze practical resolutions needed to positively
impact the insurance sector and the Nigerian economy at large.
Distinguished
ladies and gentlemen, thank you for your attention and anticipated
contributions during this forum. I welcome you all and wish you all fruitful
deliberations.
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