The new capital regime announced by the National Insurance Commission (NAICOM) may shore-up the paid-up share capital of insurance sector to N666 billion that is if the 55 insurance and 2 reinsurance firms were able to scale the recapitalization hurdles.
The composition of the industry showed that presently, there are 13 composite firms; 28 general business; 14 life and two reinsurance firms. In line with the new capital regime, where operators are to have N8 billion; N10 billion, N18 billion and N20 billion respectively, the composite firms have to pool N234 billion; general business, N280 billion; Life, N112 billion and reinsurance, N40 billion.
Owing to the window given by the industry regulator for registration of new firms, the capital may exceed N666 billion or fall below if the existing firms failed to meet their income projections, thereby leading to mergers and acquisitions.
According to the Nigerian Insurers Association (NIA) the industry’s share capital stood at N188.58 billion in 2017, whilst the shareholders’ fund was N415.66 billion.
Speaking on the new capital regime, the Managing Director, Consolidated Hallmark Insurance Plc. Eddie Efekoha, posited that the regulator came up with the exercise because it has the interest of the insurance industry at heart, stating that, operators are already engaging the regulatory body to find a common ground that will benefit all relevant stakeholders in insurance Industry.
“We cannot fight the regulator, but we will engage them to see things from own point of view. I believe they have the interest of the Industry at heart. It is a new development and discussion will continue, to reach a common ground,” he said.
Industry watchers believe the new regime would engender stronger underwriting which will increase the capacity of the insurance industry to absorb large risks, thereby, avoiding premium flight in which foreign insurers dominate the big ticket risks because of their huge capitalization.