Insurers upbeat over December 2020 recapitalisation deadline

The ongoing recapitalisation exercise in the insurance sector may be getting the required boost, as insurers articulate commitment to the exercise; saying the process is a form of corporate reorganisation, which involves making substantial changes to a company’s capital structure.

Recapitalisation is one of the strategies companies use to improve their financial stability.

The insurance industry post-recapitalisation is expected to be robust and capable of taking big risks, as well as contribute meaningfully to the nation’s Gross Domestic Product.

The decision to recapitalise may be taken by the company voluntarily, or in compliance with a regulatory directive.

In the latter sense, recapitalisation has proven to be a useful tool in the hands of the authorities for sectoral reformation to sustain adequate economic growth and development.

Following the December 31, 2020 recapitalisation deadline given by the National Insurance Commission (NAICOM), to all insurance companies to upgrade their capital to a new threshold, only a few of the underwriters are showing readiness to scale through the exercise.

The regulatory body had earlier ordered operators with composite licence to upgrade their capital base from N5billion to N18billion; Life insurance were required to increase their minimum capital requirement from N2 billion to N8billion, amounting to 400 per cent increase.

Similarly, General insurance companies are to raise their capital base to N10 billion from N3 billion , while Reinsurance firms will now need N20 billion minimum capital to operate in Nigeria.

Among few operators showing readiness for the recapitalisation exercise are: AIICO Insurance Plc, Mutual Benefits, Cornerstone Insurance Plc, AXA Mansard Insurance Plc, Linkage Assurance, Sovereign Trust Insurance Plc, NICON Insurance Limited, FBNInsurance, and Anchor Insurance Company Limited.

Those who cannot meet their obligations have no other option than to embrace mergers and acquisition to scale through the deadline.

Speaking with The Guardian over the weekend on this development, the Head, Strategic Marketing & Communications Department, AIICO Insurance Plc, Segun Olalandu, confirmed that the firm had earlier received shareholders’ approval to increase its authorised share capital to N18billion through various instruments to meet the new minimum capital base for a composite insurance based on NAICOM’s guidelines.

Olalandu stressed that in compliance with the new minimum capital requirements, AIICO recently concluded a private placement with an uptake of 38.83 per cent of its shares by two strategic investors – LeapFrog Nigeria Insurance Holdings Limited acquired 28.24 per cent stake, while AIICO Bahamas Nigeria Limited acquired 10.59 per cent stake. As a result, the paid up share capital of the company has increased from N6.1billion to N11.3 billion, while it intends to raise the outstanding capital from existing shareholders.

Also speaking, the Group Managing Director/Chief Executive Officer, Cornerstone Insurance Plc, Ganiyu Musa, told The Guardian that the company is in a comfortable financial situation to scale through, adding that, the sale of its property along the Lekki axis has further increased its liquidity to meet and surpass expectations.

He said Cornerstone would have loved to keep the property for the long run, but was challenged with the fact that real estate investment is not admissible in the ongoing recapitalisation exercise, which necessitated the sale for a handsome amount that covers the cost of the building project and still left with some profit.

On his part, the Managing Director/Chief Executive Officer, Linkage Assurance Plc, Daniel Braie, who spoke at Members Evening of the Nigerian Council of Registered Insurance Brokers (NCRIB), assured the brokerage fraternity that the underwriter will meet the new capital base of N10billion.

Braie said the firm is not looking outside for funding to meet the recapitalisation requirement, but that it has the internal capacity to raise the needed fund.

He insisted that Linkage is financially strong and have the capacity to meet its obligations as and when due, and will conclude its recapitalisation process on or before the end of second quarter 2020.

To attract more investors in the industry, and to regain shareholders’ confidence to achieving more N10billion gross premium income this year, the Executive Director, Technical, Anchor Insurance, Ikuomola Adebisi Adeleke, said the firm is putting every strategy in place to realise set target.

One of such strategies is at the fitness and awareness campaign to educate the public on the benefits of insurance that would add values to Nigerians.