L – R: Mr Oladeji Babalola, Head, Market Surveillance, The Nigerian Stock Exchange (NSE); Mr Olumide Bolumole, Head, Listing Business Division, NSE; Mr Abbas Abdulkadir, Deputy Director/Head Securities & Investment Services, Securities and Exchange Commission (SEC); Mr Agboola Pius, Director Policy & Regulation, National Insurance Commission (NAICOM); Mr Ayodeji Oyetunde, Partner, Aluko & Oyebode; Mr Eric Idiahi, Partner, Verod Capital Management Limited; and Mr Suru Daniels, Head, Projects & Structured Finance, Coronation Merchant Bank at the NSE Insurance Sector Forum themed: “Recapitalisation – A Panacea for Insurance Industry Growth” which held at The Exchange, Lagos on Tuesday, 10 December 2019.
Recapitalisation took the centre stage as Insurance experts and other stakeholders gathered in Lagos to chart the way forward.
The event put together by the Nigerian Stock Exchange (NSE) was titled “Recapitalisation: A Panacea For Insurance Industry Growth.
It was also an opportunity for stakeholders in the sector to emphasize the critical role of technology, innovative products and research and development.
Executive Director, Wapic Insurance, Bode Oyeniyi said: “We need to leverage on technology”, adding that there is need to put attractive products forward.
Earlier, the Chief Executive Officer of NSE explained that the upward review of the paid-up capital in the insurance industry would strengthen the growth and development of the sector.
According to him, recapitalisation and consolidation exercise is expected to significantly impact the industry and equally present new opportunities in mergers and acquisitions as well as private equity and public offerings.
The National Insurance Commission (NAICOM), in exercise of its statutory powers and regulatory functions, on May 20 reviewed the minimum paid-up share capital requirement for all Insurance and Reinsurance companies.
The directive does not apply to Takaful operators and Micro-insurance companies doing business in Nigeria.
Following the reviewed minimum capital requirement, the existing minimum paid-up capital share of Life Insurance business was reviewed and raised from N2 billion to N8 billion.
General Insurance business was raised from N3 billion to N10 billion; Composite business from N5 billion to N18 billion; and Reinsurance business from N10billion to 20 billion.
The new paid-up share capital requirement took immediate effect for new applications made to NAICOM by companies seeking to carry on insurance business in Nigeria.
However, existing insurance and reinsurance companies were required to fully comply with the new minimum capital requirement not later than June 30, 2020.
Onyema said that the NSE saw close parallels between the recapitalisation and that of the banking sector in 2005.
He said that the immense growth seen in banking industry in large part could be attributed to successful capital raised through the capital market.
The NSE chief reviewed the performance of the insurance industry over the years, the challenges being faced and what the future held.
“The Nigerian Insurance industry has grown remarkably over the years, generating a Gross Premium Income (GPI) of N448.6 bn in 2018, reflecting a 12 per cent growth from 2017.
“The industry also recorded an increase in its asset base by an estimated sum of N1.3 trillion as at December 31, 2018, reflecting a 17 per cent Compound Annual Growth Rate over the last three years.
“According to the National Bureau of Statistics, the Insurance sector recorded a nominal growth rate of 6.69 per cent and a real GDP growth rate of 3.96 per cent in Q3 2019 from 4.48 per cent in Q2 2019 and 1.03 per cent in Q3 2018.
“Although, this data indicates a positive outlook in the Nigerian insurance industry, the reality and headwinds faced by operators in the sector are quite formidable.
“Many licensed insurers are largely undercapitalised, thus limiting their ability to take on big ticket in-country risks, as is often required in the oil and gas, marine and aviation sectors.”
According to Onyema, as at Q3 2019, the insurance sector contributed less than one per cent to the Gross Domestic Product (GDP) of Nigeria and a penetration rate of 0.31 per cent and an insurance density of 6.2 per cent.
He said these indices showed that Nigerian Insurance Industry still lagged behind its African counterparts, as South Africa currently had a penetration rate of 14.7 per cent, Kenya 2.8 per cent, Ghana 1.1 per cent and Egypt 0.6 per cent.
“The insurance industry presents perhaps the most remarkable investment case of any industry in Nigeria and despite present challenges, it presents numerous opportunities for enhancing the economic fortunes of this country.
“Foreign investors, recognising these opportunities have acted accordingly with the likes of AXA, Prudential, Liberty, Swiss Re, SUNU Group, Saham Group, taking strategic positions in the industry.
“An estimated capital of N200billion is expected to be injected into the Nigerian insurance industry post-recapitalization with a 400 per cent increase in the minimum capital required for life, 333 per cent for non-life, 360 per cent for composite and 200 per cent for re-insurance.
“While I am optimistic that this directive by the industry regulator would enhance performance, bring about efficiency, innovation and profitability, the industry needs significant support to unleash its growth potential.
“At the NSE, we see close parallels between this recapitalisation and that of the banking sector in 2005. The immense growth seen in banking industry in large part can be attributed to successful capital raised through the capital market.
“The crucial question before us is unravelling how to replicate similar successes within the insurance space and leverage the platform of The Exchange to successfully raise rightsized capital to fuel accelerated growth.
“The NSE provides a platform to support listed corporates to meet their business objectives whilst also implementing strategic initiatives that have improved investor confidence. This has allowed listed companies to be positioned on the Exchange as attractive investment opportunities,” he said.
According to him, the NSE is working to ensure positive impact to the private sector and especially the listed companies through policy advocacy and strategy execution efforts.
“The NSE continues to engage the Federal Government on tax incentives for listed companies and exemption relating to investments in the capital market.
“We are delighted to note that we have made some strides in our discussions, some of which are evident in the proposed amendments to The Finance Bill 2019, which has now been passed by both Houses of the National Assembly.
“With the ongoing recapitalisation exercise, we will encourage the insurance operators by providing a special window to fast-track the approval process, provided the operators have demonstrated high standards of corporate governance, deep social impact, high regulatory compliance and enhanced returns for their shareholders.
“For the Post-recapitalisation, we look forward to having our first insurance company listed on the Premium Board of the NSE,” he said.
The event also had in attendance representatives of the Acting Director-General, Securities And Exchange Commission (SEC), Director General, Nigeria Insurance Association (NIA), among others . From NAN, Additional Reports