Agboola Pius, NAICOM’s director for policy and regulation, gave this update on Tuesday at an interactive session with shareholders.
He said the commission rejected the recapitalisation plans of six insurance companies and directed them to make amendments while those of two are under review and the remaining two have not submitted any plans.
Pius said that the commission saw the need for the recapitalisation to increase the retention capacity and conservation of foreign exchange earning of insurance companies.
The director said that the commission had also given a guideline on the capital restructuring of the insurance firms, which refers to the option the firms choose to finance their assets and investment, except borrowing.
He listed the options to include initial public offering (IPO), rights issue, capitalisation of retained earnings, private placement, merger or acquisition.
According to him, while the intention of the recapitalisation directive by NAICOM is not for companies to merge, if the option would be to the benefit of the shareholders, then so be it.
“In 2005/2007 recapitalisation, about four companies merged to become Custodian Vantas Kapital, two companies merged to become LASACO, two companies merged to become Linkage,” he said.
“Three companies merged to become NEM, and two companies merged to become Consolidated Hallmark, among others.
“These companies are not doing badly, but can still do better, so consolidation is done to make companies better and not to destroy them.”
The NAICOM director assured the shareholders that the commission had developed an appropriate framework to ensure that their investments were secured during the exercise.
He said that the measures put in place include a directive to the insurance companies to deposit the recapitalisation fund in the Central Bank of Nigeria (CBN) escrow account, which cannot be withdrawn without NAICOM directive.
Pius highlighted some of the benefits of the recapitalisation to include high-value creation to limit borrowing, enabling better strategic planning and reduction in the cost of capital with proper oversight.
He said it would also lead to an increase in liquidity and investment funds, hedge against risk arising from macro-economic environment, among others.
NAICOM had, on May 20, reviewed the minimum paid-up share capital requirement for all classes of insurers.
The minimum paid-up capital share for life insurers business was raised from N2 billion to N8 billion.
That of general insurance businesses was raised from N3 billion to N10 billion, composite businesses, raised from N5 billion to N18 billion and reinsurance business was raised from N10billion to 20 billion.
The new paid-up share capital requirement takes immediate effect for new applications made to NAICOM by companies seeking to carry on insurance business in Nigeria.
However, existing insurance and reinsurance companies are required to fully comply with the new minimum capital requirement not later than June 30, 2020.
Source: thecableng
