Recapitalization: Types, Sizes and Shapes of What to Expect

Insurance
1223 VIEWS
Proshare - Facebook Proshare - Twitter Proshare - Linked In Proshare - WhatsApp
Proshare

Monday, October 05, 2020  / 11:30 AM  /By Ekerete Ola Gam-Ikon  / Header Image Credit: Wikipedia


 Proshare Nigeria Pvt. Ltd.


As you might know, insurance companies in Nigeria are in a recapitalization race with two finish lines, the first being 31st December 2020 and the second, 30th September 2021, announced by the regulator, National Insurance Commission (NAICOM) last June. Recall that the Commission had in 2019 announced that Life, General, Composite and Reinsurance companies should have N8b, N10b, N18b and N20b respectively as minimum capital to operate in Nigeria.

 

Months ago, the Commission further announced that it was embarking on Capital Verification exercise to ascertain the current level of capital in all licensed insurers amongst other activities towards the determination of the first finish line.

 

Many industry operators and analysts have been expecting heightened mergers and acquisitions even as NAICOM is on course to license new insurance and reinsurance companies. These are besides changes in the leadership of some companies with a view to repositioning them for the post-recapitalization era.

 

Changes in Types?

Today, there are Five (5) types of operating licences issued for insurance companies by NAICOM namely Life, General, Reinsurance, Microinsurance and Takaful while Composite merely describes the category of those companies that have both Life and General licences. Nigeria currently has Sixty-three (63) re/insurance companies comprised of Thirteen (13) Composite, Twenty-seven (27) General, Thirteen (13) Life, Two (2) Reinsurance, and Four (4) each of Microinsurance and Takaful companies.

 

Interestingly, we have mostly focused on the Fifty-five (55) companies that are now required to meet new minimum capital requirements thus not adequately informing our citizens and residents of the types of insurance licensees available to provide tailored products and services to them.

 

The point of contact known to the public needs to be recreated,  improved and updated for effective engagements that will accordingly boost the insurance experiences of all stakeholders.

 

Sometimes, it is quite overwhelming for the would-be policyholders to hear, know, understand and decide to buy insurance in a meeting or two, except the person that had been previously aware of insurance.

 

The Sizes Are Not Small

Compared with other countries, the minimum capital that re/insurance companies in Nigeria are required to meet stand as the highest in Africa though in terms of insurance penetration the country falls behind South Africa, Egypt, Morocco, Kenya, Tunisia and Namibia.

 

If the current number of insurance companies required to meet the new minimum capital fulfilled the expectations of the regulator, the following scenario will play out:

 

  • 13 Composite insurers at N18b each would have a total of N234b; 
  • 27 General insurers at N10b each would have a total of N270b;
  • 13 Life insurers at N8b each would have a total of N104b; and
  • 2 Reinsurers at N20b each would have a total of N40b.

 

The total minimum capital would then have been N648b for the entire industry as against the probable total of N184b, if all the affected insurers and reinsurers have met the present minimum capital of N10b, N5b, N3b and N2b for Reinsurance, Composite, General and Life companies respectively.

 

When, however, by end of December this year, we close with Sixty-five (65) percent of the overall sum of N648b, discussions will switch to what Gross Written Premium (GWP) can be achieved with such capital, based on the total GWP of N490b recorded by the entire industry in 2019.

 

If we go by the argument that the minimum capital base should deliver at least two times of the amount as GWP, we can expect the insurance industry in Nigeria to hit the N1trillion GWP mark before 2022.

 

This is not being overtly optimistic when one considers the focus of NAICOM on market development, which is forcing action on product innovation, communication and hopefully, on prompt claims settlement.

 

Shaping the Shapes of New Insurers

The primary concern for all the companies in this race towards recapitalization deadline is to remain in the business while a handful are seeking to consolidate if the opportunity emerges.

 

In particular, the Life only companies required to do N8b, will want to keep their space by all means because the segment has been growing in the last couple of years due the combination of compliance calls by National Pension Commission (PENCOM) and the premium rate announced by NAICOM in 2018. Indeed, with 3 out of 4 applications for licences processed by the regulator being Life, one can appreciate the strong desire of the incumbent companies to retain theirs.

 

We should expect more Life Insurance companies in the near future, though General Insurance will continue to lead if insurers licensed to operate in this category become more innovative and invest more in customer engagement management leveraging digital solutions. 

 

Understandably, General Insurers that can afford it might be seeking to acquire interests in Life companies but I have asked: i) When will over 8m registered vehicles be genuinely insured and captured on the Nigerian Insurance Industry Database managed by Nigeria Insurers Association (NIA)? ii) When will public buildings in Nigeria be covered in line with the provisions of the law stipulated in the Insurance Act 2003?

 

Giving attention to Life segment will certainly distract any General Insurer from the opportunities that still remain untapped for it beyond the compulsory classes of insurance.

 

Also, we have read about Composite Insurers that are ready to drop either Life to enable them go on with General or vice versa.

 

Recall that this was the situation of a few General Insurers today that had to take such path to survive during the last recapitalization exercise of 2007/2008.

 

It will therefore be surprisingly impressive to have a General Insurance company that rather decides to invest in Branding and Technology to gain more market share in its segment than go for the Life licence, which requires much more capital outlay.

 

Given our youthful population, we could be seeing an insurer that clearly embraces the young ones across the strata - leadership, management, administration, operations and customer engagement. One of the drawbacks of the current efforts at repositioning the insurance industry in Nigeria is the absence of young executives in the frontline of the discussions and engagements.

 

The abilities of the old brigade to understand and adapt to the lifestyle of our youngsters, whose gadgets are more cherished than the assets we are used to insuring, will be tested and the first insurer to launch itself in that direction will win.

 

Same with the huge informal sector that have seemingly trusted only themselves through alternative risk management and insurance options like esusu, cooperatives and affinity groupings. Engaging to earn their trust remains a challenging opportunity for our traditional insurers.

 

Specifically, the growing number of farmers in our bustling agricultural sector expect insurance companies to seek their patronage through collaborative approaches and insurers, hitherto unwilling to adapt Corporate Social Responsibility (CSR) for their market development will be forced to ponder on this. 

 

What We Are Expecting 

Are we likely to have Nigeria's first digital insurance company? Possible, however, the regulator, NAICOM has to do more to collaborate with other regulators like Central Bank of Nigeria (CBN) and National Communication Commission (NCC).

 

Considering that banks are now making earnings from providing mobile and online services, the insurance industry in Nigeria needs to re-imagine how it can also achieve this by enabling policyholders to use certain self-help services.

 

While many may still argue that insurance business is anchored on person-to-person relationship and reach, many customers are enjoying the trust of the system that responds faster and with less stress.

 

Insurance offers our population much more benefits but needs to be open and accessible, available and affordable even as we look forward to the first and final deadlines for recapitalization.

 

About The Author

Ekerete Olawoye Gam-Ikon, MNIM, CPP, is a management consultant with a specialization in Strategy and Insurance. You can contact him via e:mail olagamola@gmail.com and mobile +234-806-648-1111


 Proshare Nigeria Pvt. Ltd.

 

Related to Recapitalization

  1. NAICOM Announces Minimum Paid Up Capital Policy for Insurance and Reinsurance Companies in Nigeria
  2. Insurance Sector Update: Recapitalisation... Launching into the Deep
  3. Ekerete Ola Gam Ikon To Speak On NAICOM Recapitalization Extension Till 2021 Tomorrow on WebTV
  4. NAICOM Segments Capital Requirements for Insurance Companies; Extends Deadline to Sept 30th 2021
  5. NAICOM Mulls Extension of Recapitalization Exercise
  6. Higher Capital Requirements Credit-Positive for the Nigerian Insurance Industry
  7. NAICOM Issues Update on Recapitalization Plan; Extends Deadline To December 31, 2020
  8. Insurance Recapitalization: Four Reasons Why NAICOM Should Be Transparent
  9. NAICOM Issues Update on Recapitalization of Insurers and Reinsurers
  10. NAICOM Solicits Support Of Regulatory Bodies To Drive Recapitalization of Insurance Industry

 Proshare Nigeria Pvt. Ltd.


Related Articles by Author

  1. Nigeria Celebrates 60, Insurance Sings
  2. Financial Inclusion-Changing the Strategy for Growing Risk Protection
  3. How Policyholders' Complaints Are Improving Service in Insurance
  4. Three Areas Digitization Will Transform Insurance
  5. Is Insurance a Government-led Private Business in Nigeria?
  6. Insurance: Switching from Hard Sell to Soft Sell
  7. Protecting Us Through Insurance of Public Buildings
  8. The Battle of Principles: Insurance Versus Business
  9. Insurance: Leading through Women
  10. Insurance Sector: Drawing Lessons From Others
  11. Insurance Sector Leadership Changes and PolicyHolders' Expectations
  12. Value Will Sell Faster And Longer
  13. Democratize Insurance, Empower Citizens With Information
  14. Has the Insurance Act 2003 Made Nigerians Poorer These Past Five Years?
  15. Insurance Is For Others, Not You
  16. Can Insurance Lead Nigeria's Economic Stabilization?
  17. Crisis of Identity Management, COVID-19 And Insurance
  18. The Stalemate of Claims Payment
  19. Is Insurance the Silent Guardian for Nigeria?
  20. Insurance Before And After The Virus
  21. Insurances You Have, Unknown to You
  22. Insurance of Stolen Properties
  23. Insurance, Loved by Accident
  24. Fires, Markets and Insurance
  25.  The Road Called Recapitalization?
  26. Making Insurance Work in Nigeria: Structural Realignment Required
  27. What's A Support System Without Insurance?
  28. 2019 - The Year of More Insurance
  29. Insurance Recapitalization: Four Reasons Why NAICOM Should Be Transparent
  30. Insurance - Good Product, Served Poorly
  31. Why Fake Insurance Thrives in Nigeria
  32. Rebuilding Trust In Insurance Relationships
  33. Insurance and Nigeria's Budget of Sustaining Growth and Job Creation
  34. Making Claims Payment the Basis Of Performance Measurement In The Insurance Sector
  35. 5 to 9 Insurance Questions for Nigeria at 59
  36. Insurance Broking: Is Diminishing Returns Setting In?
  37. An External Memo To The President: How The Insurance Sub-Sector Can Help
  38. Where Are The Insurance Amendment Bills Of 2008 And 2018?
  39. Kidnapping Insurance: Is It Hot In Nigeria?
  40. The Insurance Sub-Sector: Its Challenges As Opportunities For All
  41. Funeral Insurance - Bridging The Divide Between Culture and Financial Planning
  42. Insurance Recapitalization in Nigeria: What Policyholders Should Do Now!
  43. Nigeria: New Minimum Paid-Up Share Capital Policy For Insurance And Reinsurance Firms
  44. The Benefits of Standardizing the Insurance Industry
  45. Microinsurance And The New National Minimum Wage
  46. Insurance In Nigeria: Approaching 2020 Without Digital Solutions?
  47. PMB's Second Term and Buharinsurance
  48. Meeting The Insurance Needs Of Digital Natives


Proshare Nigeria Pvt. Ltd.


Related News

  1. Stakeholders Advocate for the Adoption Of Innovative Insurance Products In Nigeria
  2. NAICOM to Bar Insurers With Outstanding Claims from Scaling Recapitalisation Hurdles
  3. Global Reinsurance Sector Outlook Remains Negative for 2021
  4. President Buhari Finalises Nigeria's Membership in ATI
  5. NAICOM Announces Minimum Paid Up Capital Policy for Insurance and Reinsurance Companies in Nigeria
  6. Prudential Zenith Life Donates 100,000USD To Slum2School Towards Fighting COVID-19 Effects
  7. Insurance Sector Update: Recapitalisation... Launching into the Deep
  8. Africa Re to Disburse US$ 3.3 million for the Fight Against COVID-19 in Africa
  9. Stanbic IBTC Holdings Plc to Establish a Wholly-owned Life Insurance Subsidiary
  10. NAICOM Receive Applications to Register Four (4) New Insurance Companies
  11. NAICOM Should Give Top Priority to Claims And Insurance Promotion In Nigeria - Ekerete Ola Gam-Ikon
  12. Ekerete Ola Gam Ikon To Speak On NAICOM Recapitalization Extension Till 2021 Tomorrow on WebTV
  13. NAICOM Segments Capital Requirements for Insurance Companies; Extends Deadline to Sept 30th 2021
  14. Leadway Assurance Holds Virtual AGM; Pays N38.5bn Claims in 2019, as Total Assets grew to N394bn
  15. COVID-19 Pandemic Has Hit Every Industry Hard, And the Insurance Industry Is No Different
  16. EIOPA: European Insurers Face Increased Risk Exposures Due to COVID-19

 


 Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

READ MORE:
Related News
SCROLL TO TOP