Insurance Recapitalization in Nigeria: What Policyholders Should Do Now!

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Thursday, June 06, 2019    / 04.00PM / By Ekerete Ola Gam-Ikon MNIM, CPP


It is refreshing to see the insurance industry in Nigeria bustling and bubbling again as discussions on recapitalization takes the centre stage. Insurance, that word/name, which many people abhor and/or like to avoid, has suddenly become the critical item on the meeting agendas of financial institutions especially investment banks, stock broking firms, rating agencies, consulting firms and, importantly, law firms around the world because the Federal Government of Nigeria through the National Insurance Commission (NAICOM) has announced new capital requirements with deadline of June 2020. 

The fact that every single insurance company of the 58 that have operating licences from NAICOM is required to beef up its capital (paid up) base is enough reason for the international discussions. This is understandably so because the volume of funds required would be most difficult to raise locally even as global insurance brands are expected to take keen interest in having a bite of the pie. 

Two (2) Reinsurers, Thirteen (13) Composite Insurers, Twenty-eight (28) Non-life and Fourteen (14) Insurers are looking to beef up their capital bases by additional N10b, N13b, N7b and N6b respectively. Until now, they have been operating with N10b, N5b, N3b and N2b respectively; a position that has remained over the last 12 years since another regulatory-driven recapitalization. 

Even as we expect consolidations (mergers and acquisitions) to happen considering the weak state of many of these companies, there will be a lot of work to be done especially in convincing one strong company to acquire another weak one that offers nothing in real value. 

No one should be surprised to see more business psychologists and mentors than lawyers and financial advisers involved in the process as the deadline draws nearer. 

As it stands, all critical stakeholders in the insurance industry in Nigeria seem to have their work in the recapitalization process cut out for them except the policyholders! 


The Work for Policyholders

The Nigerian Insurance Sub-sector earns about 80% of its revenue from corporate policyholders including the Government at the Federal and State levels. 

The announcement by NAICOM has come Six (6) months ahead of the anniversary (renewal) dates for most of the insurance contracts which fall due by next January except the Group Life policy for Federal Civil Servants which is pending. This assumes that the policyholders have enough time to review their insurance portfolios and determine where their risks should be transferred to and on what terms and conditions. 


However, the work for Policyholders now, whether corporate or individual, include but not limited to:

  • Requesting a recapitalization roadmap from their respective insurers;
  • Requesting an industry-wide report from their consortium of insurance brokers;
  • Conducting an independent appraisal of the submissions received from the insurers and brokers;
  • Taking appropriate internal actions to ensure their employees are well informed about the insurance market outlook;
  • Considering a multi-year agreement with the selected/appointed insurers.

When policyholders have taken steps to do the work expressed above, they will minimize the chances of becoming victims to insurance companies that might still have the tendencies to deliver poor services especially with regards to product specification and claims payment. 

Besides, it will address the challenges of admitting an insurance company on their insurance programme based on personal relationships that suck when claims occur and get badly managed. 

Policyholders readily switch from one insurer to another because insurance companies become annoying during the process of getting a claim settled, that is, paid or denied. 

Those policyholders that decide not to do the work expressed above should not hereafter speak negatively about the insurance industry in Nigeria, after all, in law ignorance is not an excuse. The days of policyholders blaming insurance companies for tiny prints, obsolete language and untrained salespeople are over; the connected economy of today means you can know all you want to know.


How Policyholders Will Fair

If NAICOM addresses only the issue of recapitalization which is likely to overwhelm them and the operators (reinsurers, insurers, brokers, agents, loss adjusters) without giving equal measure of attention to management, governance, claims, public awareness campaigns and investment roadshows, it is most likely that existing and new policyholders will face:


  • Increase in premiums payable;
  • Payment of claims by instalments;
  • Cancellation of contracts midway through the insurance year;
  • Takeover of their insurance programs by new managers least known to them;
  • Low adoption of digital solutions to deliver the critical needs of speed and convenience;
  • Enforcement of compulsory insurances. 

The insurance industry in Nigeria is known to respond relatively slower to changing dynamics of our economy and receive little attention from the managers of our national economy at the Presidency. 

So with recapitalization should come increased capacity to underwrite risks that will address the challenges we face from natural disasters (flooding, drought) to man-made distresses like kidnapping and collapsed buildings as well as capital flights due to non-availability of expertise to handle special risks.  

Like tax, insurance is becoming not only a revenue booster for governments at all levels but also a viable channel for job creation and sustainable development. Policyholders should therefore see insurance as an industry that also offers opportunities for business growth, when they connect with it and not just one that takes from them.


Policyholders of Tomorrow 

An advice for the policyholders of tomorrow, those whose lives depend on mobile devices, apps and data: Risk is free, take it but know that there will be consequences and you do not want to be left with the short end of the stick.  

Do attempt to insure your devices - phones, laptops and wearables; if you cannot get an insurer to provide cover, you will be helping to create a new insurance product! 

The demanding posture of policyholders of tomorrow is what highly capitalised insurers would need to stretch and break the current boundaries hindering insurance penetration in Nigeria.  

Now, let the policyholders work for the real recapitalization of the insurance industry in Nigeria. 


About The Author

Ekerete Olawoye Gam-Ikon, MNIM, CPP is a management consultant with specialization in Strategy and Insurance. He can be reached vide telephone on +234-806-648-1111 and +234-802-585-0344 or by e-mail vide

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