NAICOM Harps On Benefits Of Recapitalization, Claims Payment, Solidification

By LOVETH AZODO, Lagos

The recapitalization of insurance industry by the National Insurance Commission (NAICOM) has raised eyebrows of shareholders in the industry, in a bid to throw more light on the exercise, the commission has stated some of the benefits of the exercise.

In an interactive meeting with shareholders held Today in Lagos, the commission stated that the lack of liquidity which according to the commission is one of the primary purposes of the exercise is the major reason why the underwriters are not paying claims.

Representing the Ag. Commissioner for Insurance Olorundare Sunday Thomas, the Director Policy and Regulation, NAICOM, Mr. Agboola Pius iterated that the last recaptalization of the industry was in 2006/2007 adding that the commission in 2018 introduced the Tier-Based Minimum Solvency Capital (TBMSC) but according to him was attacked.

On the benefits of the exercise, he maintained that the recapitalization exercise will increase in retention capacity and conservation of foreign exchange earnings stressing that retention of local underwriters has been low “We intend to solidify the retention strength of the companies.”

Pius decried that companies like Sahara Power which insures $3,171,035,000.00 takes 53.705percent of it’s businesses to foreign insurers, Dangote Refinery which insures $6,770,861,312.00 takes 71.569percent of it’s businesses to foreign insurers to mention but a few adding that the local insurers do not have the financial strength to cover 100percent of their businesses “the same way you take the risk out same way you take the premium out, when they are more solidified they can retain the risk,” he stated.

Furthermore, he mentioned that the commission intend to create high value, give hedge against risks arising from macroeconomic environment and the need for Capital restructuring.

On the commission’s commitments he insisted that despite its low penetration in Nigeria, the potential of insurance is very huge assuring that NAICOM has decided to put more emphasis on market development to enable investors have value for their investment, Enforcement of compulsory insurance, IT Infrastructure in the insurance sector to mention but a few.

Pius disclosed that 80percent of the insurers subscribed for IPOs right issues, capitalization of retained earnings, however the commission suggest that merger, private placement remains a good route to achieve the capitalization.

On Merger he stated “the primary aim is not for companies to merge but if they have to merge, let it be, in 2007 companies like Custodian, NEM Insurance, Lasaco merged and they are not doing bad but can do better,” he said.

In response, some of the shareholders tasked NAICOM on the compulsory Insurance of Motocycles, tricycles and enforcement of compulsory house insurance.

On rate cutting, they urged NAICOM to make policies that will curb rate cutting adding that the underwriters fight for clients hence demarketing the industry.

Also Speaking, Head of Department Financial Guidance and Corporate Governance, SEC Suleiman Alhassan assured shareholders that commission will ensure the success of the recapitalization exercise “we will make sure that the Recapitalization exercise is successful and the investors will benefit from it,” he assured.