NAICOM Mulls Shift in Recapitalisation Deadline


Ebere Nwoji

National Insurance Commission (NAICOM) is to reconsider the deadline for insurance companies to recapitalise, THISDAY has learnt.

It was gathered that due to the COVID-19 pandemic, NAICOM may extend December 31, 2020 deadline to a date yet to be ascertained.

An official commission told THISDAY that the decision on the recapitalisation would be announced only after an impact analysis of the effects of the pandemic on the economy had been conducted and the length of its inactivity period determined.

The Acting Commissioner for Insurance, Mr. Sunday Thomas, while responding to THISDAY’s enquiry on the issue said: “Decision concerning the recapitalisation programme can only be taken after an impact analysis and the period of inactivity determined.”

The umbrella body of insurance underwriters, the Nigeria Insurers Association (NIA) also told THISDAY that insurance underwriters would push for the extension of the time given by the regulator for insurers to raise their fresh capital.

NIA Chairman, Mr. Tope Smart, in response to THISDAY’s enquiry, said: “The insurers will push for an extension of time given the economic impact this pandemic is having on the economy of not only Nigeria but the whole world.”
Smart, who is also Managing Director Nem Insurance, added that the insurers are currently focused on efforts to aid health workers to fight the spread of the pandemic.

He said the insurers were doing this through the donation of working tools and protective gear to the health workers and free life insurance covers for them.
He explained that insurers would approach the regulator to review the deadline for the recapitalisation after the pandemic.

Another chief executive of one of the leading insurance firms, who did not want his name in print, also said the regulator should know that even if it did not want to cancel the recapitalisation, it should extend the deadline by a minimum of one year, from December 31, 2020 to December 31, 2021.

According to him, it would be difficult at this period for insurers to attract the much-needed investments, from either local or foreign investors.
As such, he said, any insurer looking at foreign investors to put money in his company, “in the next two years must be joking.”

He said it would be unfair if NAICOM should insist on going ahead with the initial deadline for the recapitalisation.
Also, analysts at CSL Stockbrokers Limited noted that though the recapitalisation was long overdue considering the substantial increase in the value of insured assets as well as the adverse impact of fragile macro conditions since the last recapitalisation in February 2007, the decision to extend the deadline could be imperative in the light of the weak investor sentiment brought about by the dual shock of COVID-19 and the downturn in oil prices.

“Accordingly, we think the issuance of debts instruments may come at a very high cost to the players at this time considering the risk premium that will be demanded by investors.

“On the other hand, raising equity capital does not appear feasible. Some of the under- capitalised players currently have a negative book value of equity and are trading below their par values.

“Weak macro conditions would further deter investors as they remain sceptical on the ability of the players to unlock the potentials in the industry. Nonetheless, we expect to see a flurry of mergers and acquisitions in the industry once conditions become more favourable,” the Lagos-based firm added.

Under the revised capitalisation requirements, life insurance firms are required to have a minimum paid-up capital of N8 billion, from N2 billion previously, while general insurance companies are required to raise their minimum paid-up capital to N10 billion, from N3 billion previously.

The regulatory capital for composite insurance was also raised to N18 billion from N5 billion previously, while reinsurance businesses are now required to have a minimum capital of N20 billion from N10 billion previously.
The companies were initially given June 30, 2020 to raise the capital, but it was later extended to December 31, 2020.