Six insurance companies have notified the National Insurance Commission of their plans to merge as part of their efforts to meet the regulator’s recapitalisation requirements.
The Director, Policy and Regulation at NAICOM, Pius Agboola, who spoke to our correspondent, said that some other insurance companies were also looking for partners to merge.
“Only six companies have indicated interest in mergers and acquisitions out of 44 companies reviewed,” he said.
Agboola noted that NAICOM had barred the regulated entities from borrowing money to meet their recapitalisation requirements.
He said that while some of the companies that borrowed money after the last recapitalisation in the industry were doing well, most of them had been bought over by foreign investors.
According to him, enhanced capital base would enable the insurance companies to have more capacity to underwrite more risks.
He said, “If any of them wants to bring in money, they must become owners and manage the company together, not give them money and go and sit down and expect them to pay back.
“When they are owners, they will have directors; they know how the company is being run. If the person at the helm of affairs is not doing well, they will fire him and employ another person.”
The Managing Director/Chief Executive Officer, Capital Express Assurance Limited, Mrs Bola Odukale, said that the company was in talks with three companies for acquisition purposes.
Latest summary of the recapitalisation plans of insurance companies obtained from NAICOM showed that most of the companies planned to raise capital through share premium, capitalisation of retained earnings, Initial Public Offerings, right issues and private placement.
Currently, there are 57 insurance companies, comprising 14 specialist life insurance firms, 28 general insurance companies, 13 composite insurance companies and two reinsurance companies operating in the country, according to the Nigerian Insurers Association.
It would be recalled that in 2019, NAICOM raised life insurance companies’ capital from N2bn to N8bn.
General companies got a raise from N3bn to N10bn, while composite insurance companies’ capital was raised from N5bn to N18bn.
The regulator also increased the capital of reinsurance companies from N10bn to N20bn.
NAICOM stated that the insurance firms’ paid-up capital would be their new capital base.
In a recent circular, NAICOM extended the recapitalisation deadline for insurance companies earlier slated for June 30, 2020 to December 31, 2020.