LASACO Assurance Plc plans to issue up to 40 billion ordinary shares of 50 kobo each to raise new equity funds as insurance companies race to beef up their capital ahead of the implementation of new capital requirements.
In a regulatory filing at the Nigerian Stock Exchange (NSE), the board of directors of LASACO indicated the company would create and issue new 40 billion ordinary shares of 50 kobo each to raise new capital from the investing public.
According to the proposal, LASACO will increase its authorised share capital from N5 billion of 10 billion ordinary shares to N25 billion of 50 billion ordinary shares through the creation of additional 40 billion ordinary shares.
Then, the insurance company will proceed to issue up to 40 billion ordinary shares by way of public offer, private placement or preference shares.
The board of directors of the company has scheduled an extraordinary general meeting for early October when shareholders are expected to approve many resolutions increasing the share capital and authorising the board to raise the new capital.
Insurance companies have launched plans for emergency fund raising at the capital market as consolidation looms in Nigeria’s most populous quoted industry. There are 27 insurance companies quoted on the NSE.
Many insurance companies have started fund raising process, in what may become an industry-wide rush as the National Insurance Commission (NAICOM) moves to implement new capital requirements for the industry.
Under the new NAICOM’s tier-based minimum solvency capital policy, insurers will be classified into three tiers according to the minimum capital base and risk-bearing capacity. Tier 1 insurance companies are required to have minimum capital base of N9 billion for general insurance and N6 billion for life insurance, implying a composite capital base of N15 billion. Tier 2 companies are divided into two categories, with N4.5 billion minimum capital base for general insurance and N3 billion for life assurance. Thus a composite insurance-general and life insurance, will be required to have minimum capital base of N7.5 billion. Tier 3 companies will continue to operate on the existing minimum capital base of N3 billion for general insurance and N2 billion for life insurance, implying a composite capital base of N5 billion for a composite tier 3 insurance company.
Under the risk-based capitalisation approach, tier 1 companies will be able to undertake all risks including annuity and high-level special risks such as energy and aviation risks. Tier 2 companies will undertake retail insurance as prescribed under Tier 1, including commercial and industrial risks and group life assurance while tier 3 companies will only be able to write retail insurance only including micro insurance, motor, fire, agriculture, compulsory liability insurances, individual life, health and miscellaneous insurance.