Experts charge insurers on N59trn real estate opportunity

Experts in the nation’s insurance industry have called on underwriting firms to tap into opportunities in the real estate sector, which valuers estimate at about N59 trillion to contribute to the growth of the economy.

The Guardian gathered that although real estate investment is not admissible as a part of the paid-up capital in the ongoing exercise, insurers perceive property as another investment sanctuary.

Many insurers after the regulatory-induced recapitalisation will have enough funds at their disposal to invest in profitable sectors to give good returns to their shareholders.

The National Insurance Commission (NAICOM), has raised the minimum paid-up share capital of a life insurance company from N2 billion to N8billion, non-life insurance from N3 billion to N10billion and composite insurance from N5billion to N18billion.

Re-insurance companies are to raise their capital base from N10 billion to N20 billion.Experts believe that post-recapitalisation, on surviving underwriters, may be overwhelmed by excess liquidity and would, therefore, explore where to plugin. Hence, real estate offers a lot of attraction.

Few underwriters in the sector like LASACO Assurance Plc, Cornerstone Insurance Plc, Anchor Insurance Plc, Royal Exchange Plc, among others, have planned for post-recapitalisation, andare looking towards the housing sector, just as AXA Mansard Insurance Plc and AllCO Insurance Plc are also gearing up.

Although there is a surplus in the property market currently, experts believe the return on investment (RoI) in the sector is still higher.

Meanwhile, organisations like NICON Insurance, Niger Insurance Plc, and LASACO Assurance Plc among others, have sizeable investments in property and are looking for buyers for some of them to augment their capital in a bid to boost their liquidity and raise their capitalisation.

Although they are planning to sell to resolve a short-term challenge, which borders on capitalisation, they are mooting the idea of reinvesting in the market after the conclusion of recapitalisation exercise.

Commenting, the Group Managing Director/Chief Executive Officer, LASACO Assurance Plc, Segun Balogun, said insurers will diversify into real estate and hospitality business post-recapitalisation, as part of their plans to increase ROI.

He said the company’s volume of investment in the real estate business is about N3.3billion, adding: “We have discovered that for companies outside Nigeria that are making good returns, it is not only via insurance that they make income, but also by what they divert or direct the money into that makes good returns for them. They diversify into some other sectors of the economy to augment the income that is being made from the insurance business.”

In the years ahead, he said, the firm would be a major player in the hospitality and the real estate industry. Also, the Group Managing Director/Chief Executive Officer, Cornerstone Insurance Plc, Ganiyu Musa, disclosed that the insurer had to sell its investment in the property to raise capital, adding that it can still reinvest in real estate in the future as long as it remains profitable.

“Of course, the original intention was to hold it for the long term, but shortly after we completed it, NAICOM then came up with the recapitalisation programme, and unfortunately, one of the provisions of the exercise is that investment in properties would not be allowed as an admissible asset. So, we are now in a situation where we have invested about a N4billion of our funds and the regulator is saying, ‘Oh sorry! This N4billion will not count.”

“We took the big decision to sell the property, which we did at a very handsome price. And just in one swoop, it resolved many issues. We now have a significant amount of liquidity. We don’t have the headache of recapitalisation, and we have done what the regulator wants, which is to convert any property to cash,” he added.