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Insurers to raise N50 billion fresh capital for recapitalisation

By Bankole Orimisan
05 November 2019   |   3:28 am
Out of the 58 insurance companies in the nation’s economy, seven have reached to their investors to mobilise a cumulative sum of N50 billion new capital to meet June 2020 recapitalisation deadline.

Out of the 58 insurance companies in the nation’s economy, seven have reached to their investors to mobilise a cumulative sum of N50 billion new capital to meet June 2020 recapitalisation deadline.While others are still fine-tuning strategies to beat the fast approaching deadline to shore up their share capital to a new threshold, analysts are projecting a mixed outcome.

The Guardian learnt that the concerned insurance companies have utilised their 2018 yearly General Meetings, as well as Extra Ordinary General Meeting (EGM) to seek and receive approval from their respective shareholders to raise capital to meet the new regulatory benchmark. The insurers include Cornerstone Insurance Plc, WAPIC Insurance Plc, LASACO Assurance Plc, Consolidated Hallmark Insurance Plc, Sunu Assurances Nigeria Plc, AIICO Insurance Plc and Sovereign Trust Insurance Plc.

But the likes of Royal Exchange Plc, Linkage Assurance Plc, Anchor Insurance Limited, Saham Unitrust Insurance Plc, Universal Insurance Plc, Guinea Insurance Plc, Industrial and General Insurance (IGI) Plc, Great Nigeria Insurance (GNI) Plc, among others, are talking to new and existing investors, while others are mooting the idea of mergers and acquisition.

The seven insurers have already approached the Nigerian Stock Exchange (NSE) to raise fund through the capital market and in the next few weeks, will approach NSE for approval of their offerings, having earlier received the approval of the National Insurance Commission (NAICOM) to proceed with their recapitalisation plans.

They are currently persuading existing shareholders to upgrade their shareholding while appealing to new investors to see their respective offerings as the next investment hub. Findings revealed that the concerned insurers also want to upgrade capital through public or private investors or both, as some had begun share reconstruction plans to actualise the move.NAICOM had earlier ordered operators with a composite license to upgrade their capital base from N5 billion to N18 billion to continue to underwrite life and non-life insurance businesses in the country.Life insurance firms were required to increase their minimum capital requirement from N2 billion to N8 billion, amounting to 400 per cent increase in their capitalisation.

Similarly, General insurance companies are to raise their capital base to N10 billion from N3 billion to continue to exist in insurance industry, even as Reinsurance Firms will now need N20 billion capital base to operate Reinsurance business in the country, unlike N10 billion they were operating with, prior to now.

The shareholders of WAPIC Insurance Plc have authorised the company to raise its authorised share capital to N18 billion for its Life and General businesses from the current N8.5 billion, meaning that, the insurance firm is looking for about N9.5 billion. Consolidated Hallmark Insurance (CHI) plans to raise its capital base from N6.1 billion to N10 billion by way of rights issue, hence, needing to raise additional N3.9 billion. LASACO Assurance Plc has approached and gotten its shareholders’ approval to raise additional N10 billion capital.

The N10 billion additional capital, when added to its current shareholder’s fund of over N8 billion, will allow the assurance company hit N18 billion capital base benchmark as a composite insurer in the ongoing recapitalisation exercise.AIICO Insurance Plc has received shareholders’ approval to increase its Authorised Share Capital from N10 billion to N18 billion.This, according to the insurer, was in line with its preparedness to meet the new minimum capital requirement for Composite Insurance license, which it is currently operating with.SUNU Assurances Nigeria Plc, is already exploring about N6 billion rights issue to raise its capital base beyond the current N7bn authorised share capital, which will allow the insurer to underwrite all classes of general risk business.

The shareholders of Cornerstone Insurance Plc have authorised its board to raise an additional N10 billion capital in a bid to meet the recapitlisation deadline of June 30, 2020 for the insurance industry in the country. All of the above makeup about N50 billion being sought by the companies.

The Chairman of Sovereign Trust Insurance (STI) Plc, Oluseun Ajayi, said the mandate to scale up capital base is already at an advance stage, stressing that the programme for capitalisation will take off with the issuance of rights to existing shareholders of the company.The company, according to him, will be issuing a total of 4.17 billion ordinary shares to its esteemed shareholders, adding that the decision will be finalised by the third quarter of this year.

President, Chartered Insurance Institute of Nigeria (CIIN), Eddie Efekoha, commended NAICOM for initiating the exercise, pledging operators’ support for the exercise which he believes will help grow the sector.He said that high foreign exchange rate and low capacity of some underwriters necessitated the exercise. President of the Institute of Loss Adjuster of Nigeria (ILAN), Femi Hassan, said his members want the recapitalisation to take place because it would allow operators to put some structures in place that will help to grow the industry.