Shareholders Condemn NAICOM’s New Capital Regime, Vow to Protect Their Investments

L-R: ISAN President Emeritus, Sir Sunny Nwosu and another shareholder at CHI Plc AGM in Lagos

Shareholders under the aegis of the Independent Shareholders Association of Nigeria (ISAN) have condemned in strong terms the new capital regime for insurance industry announced on Monday by the National Insurance Commission (NAICOM) just as they vowed to protect their investments in the industry.

The body also kicked against regulator’s attitude towards the indigenous insurance companies citing it as bane of the industry’s growth.

In an interview with the Revealer, the President Emeritus, Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu, said capital inadequacy is not what is affecting the Nigerian insurance industry.

Nwosu who expressed sadness and displeasure on NAICOM’s announcement on Monday of new capital regime for insurance and reinsurance firms in the country decried the safety of shareholders investments in the industry but vowed that ISAN would do everything within its powers to protect its members’ investments.

“It is so sad and disheartening that this morning I read in the papers that NAICOM is asking insurance and reinsurance companies to recapitalize. When they introduced the Tier-Based Minimum Solvency Capital (TBMSC) in 2018, we resisted and took them to court and we defeated them in court which led to the withdrawal and cancellation of that policy.

Nwosu who blamed the industry’s misfortune on the regulator which he said are fond of initiating regulations without considering the industry’s operational environment, added that on the latest action by NAICOM, ISAN will seek further advice from its counsel on what to do next.

He said he finds it difficult to agree with NAICOM that capital inadequacy is the problem of insurance industry in Nigeria, pointing out that insurance stock is not popular and no longer yielding returns to investors and because of these investors are no longer interested in investing in insurance stocks.

Nwosu argued that instead of NAICOM asking operators to raise capital when the industry is trying to survive after years of recession, called on the regulator to make insurance stocks attractive at the Stock Exchange market in order to make investors invest in them.

He said the time frame given to the underwriters to recapitalize is inadequate, adding that in other developed countries 18 months is allowed.

“I think what the regulator should do is to see how  they can make the stocks of the public quoted insurance companies attractive for investors, instead of asking the players to raise capital when they are just recovering from years of recession, more so this is an election year. The timing is not proper.”

He called on the leadership of NAICOM to put their act together and think of how to develop the sector to contribute adequately to the development of the nation’s Gross Domestic Product (GDP).

“A situation where those you are regulating are always against your decision, then as a leader it is advisable you look inward and ensure you put your acts together.

“Everything in insurance sector is upside down. Instead of regulator supporting indigenous insurance companies is supporting foreign insurance firms coming into this country. Nobody thinks about the opinion of our shareholders because those foreign investors that are coming, they are driving away the shareholders and they are the same people who are taking away both government businesses and high rising individual businesses in this country. And tomorrow we say we are patriotic Nigerians, there is no patriotism in killing the industry that supposed to be the country’s economic shock-absorber.

“We don’t’ want what happened in the past to happen again. Who owns insurance companies? Even though we (shareholders) are the minority, but the fund is provided by shareholders. Whatever happens, their interest should be protected.

“Insurance: You have made a rule, no premium, no cover, we acknowledged it. What then do you need N10 billion for? How do you encourage the same shareholders to put in their money into the industry whose share value is dropping on daily basis?. Sir Nwosu asked.

While speaking on behalf of shareholders at the 24th Annual General Meeting (AGM) of Consolidated Hallmark Insurance (CHI) Plc in Lagos, Sir Nwosu said the new capital regime announced by NAICOM for insurance industry may threaten the industry’s existence.

“The recapitalisation exercise announced by the regulator will further heighten the tension in the insurance sector, as public shareholders are sceptical of investing their money in insurance companies under the current regulatory atmosphere. The commission is only making the business operating environment very difficult for insurers. There is nowhere in the world where recapitalisation exercise is done under one year, as planned by NAICOM,” he said.

He tasked insurance operators to rise up, as a unit, to oppose the move, noting that, most underwriting firms are not in a good financial position to pay dividend, and now, the regulator wants them to recapitalise. He said, “It is suspicious to increase capital of insurance companies like NAICOM is doing and insurance operators must rise up to it because it affects their respective companies. Anywhere in the world, 18 months is the most recognised time frame for recapitalisation exercise.”

In his reaction, the Managing Director/Chief Executive Officer, Consolidated Hallmark Insurance Plc, Mr. Eddie Efekoha, said the regulator came up with the exercise because it has the interest of the insurance industry at heart, stating that, operators are already engaging the regulatory body to find a common ground that will benefit all relevant stakeholders in the insurance Industry.

Efekoha said, “We cannot fight the regulator, but we will engage them to see things from our own point of view. I believe they have the interest of the Industry at heart. It is a new development and discussion will continue for us to reach a common ground.”

It would be recalled that 12 years after the last recapitalisation exercise in the insurance industry,  NAICOM announced on Monday that Insurance companies with composite license will now need to upgrade their capital base from N5 billion to N18 billion to continue to underwrite life and non-life insurance businesses in the country. The new capitalisation, which translates about 350 percentage increase from the previous capital base, kick starts a fresh recapitalisation exercise in insurance sector of the nation’s economy.

The commission cited astronomical increase in value of insured assets, consequent exposure to higher level of insured liabilities and operating cost of insurers, among others, as factors that necessitated the need to recapitalise the insurance industry.

In a circular released and signed by the Director, Policy and Regulation Directorate of NAICOM,  Mr. Pius Agboola, Life insurance firms were required to increase their minimum capital requirement from N2 billion to N8 billion, amounting to 400 per cent increase in their capitalisation.

NAICOM also mandates General insurance companies to raise their capital base to N10 billion from N3 billion to continue to exist in insurance industry, even as Reinsurance Firms will now need N20 billion capital base to operate Reinsurance business in the country, unlike N10billion they were operating with, prior to now.

Existing insurance companies now have till June 30, 2020 to recapitalise, while a new insurance firm will need to meet up the new capitalisation before it is issued a license to transact insurance business in the country.

Efforts to speak with the Chairman, Nigeria Insurers Association (NIA), Mr. Tope Smart, to comment on the issue, proved abortive as his phone number refused to go through.