Fola Daniel, Commissioner for Insurance
The Federal Government has renewed its calls on insurance companies to consolidate their operations by way of merger and acquisition, warning that those who fail to do this may have no place in the industry under the current reform programme.
The Minister of State for Finance, Dr. Yerima Lawan Ngama, gave insight into the thinking of government in his keynote address at the ongoing 2012 International Education Conference hosted by the Chartered Insurance Institute of Nigeria (CIIN) in Abuja, called on industry operators to take the advice seriously.
He recalled the ongoing financial crisis that is sweeping the whole of European countries, adding that they would not be without impact on the operations of local operators.
According to him, the operators should expect bigger challenges arising from the emerging opportunities in the country’s insurance market, particularly in the area of acquisition of skills and manpower as well as upgrading to the new financial standards and deploying adequate information technology platform going forward.
The minister also observed that only big and financially strong companies would be able to absorb the storm, while smaller and weak companies would be weighed down in the process.
He renewed government’s appeal to the operators to find ways of merging their operations with a view to building stronger companies with the financial muscle to underwrite mega risks across the country.
“I must not fail to mention the observed disproportionate cost of doing business which will further escalate as a result of emerging challenges such as International Financial Reporting Standards (IFRS), automation and cost of training specialist manpower in oil and gas, aviation and engineering risks.
“The above challenges will leave no room for fringe players as only the big players will be able to break even. These difficulties rather than stalemate our matching forward, should spur opportunities for mergers and acquisition in the industry not just as a window for survival but an avenue for significant and profitable players,” Ngama said.
Highlighting some of the advantages in merger and acquisition, the minister, said “this option will guarantee efficiency and effectiveness; build stronger financial and technical capacity, the capability to underwrite larger risks and better access to international reinsurance support. The industry will thus be able to retain more risks locally than it currently does.”
He also confirmed that the National Insurance Commission (NAICOM) would continue to steer the industry on the path of development as a means of reducing insurance gap and deepening acceptance of insurance as a means of managing our risks.
He said the commission was working with GIZ and Elfina to harness opportunities in micro-insurance through ongoing diagnostic studies, while agricultural insurance is now open to all underwriters as against the previous practice of almost exclusivity conferred on NAIC.
Ngana added that by middle of this month, the commission would release the guidelines on full fledge takaful insurance as against the existing practice of window operation. He said, “all of these efforts are expected to galvanise the market to enhanced productivity and meaningful contribution to the nation’s economy.”
The President of CIIN, Mr. Wole
Adetimehin in his address, observed that the theme of the conference, “New Tunes for Lean Times” was fascinating and captivating, noting that all over the world, people have been searching for solutions to the challenges
facing their economies.
He advised that even in the face corruption and greed in governance, people must continue to look for lasting solutions to the avoidable wastages in the systems