All Posts in "Insurance"

The Chartered Insurance Institute of Nigeria (CIIN) says the dearth of skilled professionals in the marine insurance business is responsible for the low number of practitioners in the sector.

CIIN President, Mr Muftau Oyegunle, made the disclosure in an interview with the News Agency of Nigeria (NAN) on Tuesday in Lagos.

He spoke against the backdrop of dearth of skilled professionals in marine insurance business in the country.

Oyegunle regretted that most of these practitioners were nursing fear of the unknown for the future of the marine insurance business in Nigeria.

“To the credit of the institute, every year, the number of professionals we produce is increasing, though the increase may not be in radical numbers, but the number of professionals have been going up.

“The issue here is in the area of specialisation. Where are people concentrating their efforts? At a stage, it was aviation insurance that was the problem.

“Another stage, it was life insurance that was the problem, but these days, there are whispers of marine insurance here and there.

“For marine insurance, we have more than three marine courses in our syllabus; that is, one at the diploma level and two at the qualifying level.

“But the question is, are people taking them? My answer may be as good as yours; because if people are taking them, I think the industry will not be complaining,” he said.

He noted that it would be out of place to force people to become specialists in certain areas.

Oyegunle added that the courses were for them to freely specialise in their areas of choice.

”But of course, you know people will specialise in areas they feel they have a clear future for,” he added.

Patoma Admin by — January 28, 2021 in Insurance 0

Ganiyu Musa has been inaugurated as the Chairman, Council of Bureaux, ECOWAS Brown Card at the 37th Session of the Council in Abuja.

Musa is the current Chairman, Nigerian Insurers Association (NIA) and Group Managing Director (GMD), Cornerstone Insurance Plc.

The 37th Ordinary General Assembly of the Council of Bureaux, ECOWAS Brown Card Insurance Scheme, with the main topic, ‘ECOWAS Brown Card Insurance : Emerging Challenges & Strategies for a better future’ held virtually in line with COVID-19 directives

The ECOWAS Brown Card Insurance Scheme was established by Protocol A/P1/5/82 signed by the Head of States and Governments of the Economic Community of West African States (ECOWAS), on 29th may 1982 in Cotonou, People’s Republic of Benin.

The main objective of the Scheme is to ensure prompt and fair compensation to the victims of road accidents for the damages caused them by non residing motorists travelling from other ECOWAS member States to their country. In Europe, Green Card is a similar scheme implemented in 1953.

The ECOWAS Brown Card Scheme operates through a 14 National Bureaux network spread throughout the fourteen Member States. Each National Bureau plays two major roles, which are; to ensure Brown Card availability for local motorists : National Bureau operates therefore as an Issuing Bureau and to conduct investigation and settle claims arising from an accident caused by motorist holders of Brown Card. It then acts as a Handling Bureau.

Musa in his acceptance speech, promised to address all the highlighted challenges bedeviling the success of the scheme, promising to leverage the successes already recorded to reshape and promote the scheme among West African countries.

He stressed that the brown card insurance scheme is an idea that could transform insurance, especially, motor insurance scheme across the borders of West African countries, adding that, it is an initiative that can raise insurance awareness and penetration across the region.

Musa is a highly experienced management professional with over 35 years of diversified experience in insurance, reinsurance, audit, consulting, business advisory and financial management. His professional experience started with Pannell Kerr Forster and later Arthur Andersen & Co where he trained and qualified as a Chartered Accountant and gained top quality experience in audit and financial consulting.

He subsequently worked at African Reinsurance Corporation for 19 years, holding key positions, including Director of Finance & Accounts/Chief Financial Officer and Deputy Managing Director.

He left Africa Re in 2011 to join African Capital Alliance (ACA), a leading pan-African private equity firm as Insurance Sector Specialist and a Director on the Board of Cornerstone Insurance Plc.

He joined Cornerstone Insurance Plc in 2012 as the Group Managing Director/CEO and he is the current Chairman of the Nigerian Insurers Association having also served as Deputy Chairman and Treasurer.

Ganiyu holds a Bachelor of Science (B.Sc. Hons.) degree in Business Administration and a Master in Banking and Finance (MBF) degree, both from the University of Lagos.

Patoma Admin by — January 28, 2021 in Insurance 0

Allianz France is making two new management appointments.

Pascal Thébé, 59, has been promoted head of CEO office. A graduate of the Ecole Centrale de Paris, the Institut d’Etudes Politiques de Paris (Sciences Po) and the Institute of French Actuaries, P. Thébé began his career in 1986 with the AXA Group where, in 23 years of activity, he held several management positions.

In 2009, he joined Allianz France as a member of the executive committee in charge of the technical and products department and Deputy Chief Executive Officer of Allianz IARD and Allianz Vie. In 2018, he became head of the data, customer and communication unit.

Julien Martinez has been appointed head of the CSR (Corporate Social Responsibility), strategy, data, customer and communication unit.

Aged 38, J. Martinez is a graduate of the Ecole Normale Supérieure (ULM), Sciences Po Paris and the Ecole Supérieure des Sciences Economiques et Commerciales (ESSEC). He joined the German group’s French subsidiary in 2016 as manager of innovation and M&A strategy.

Patoma Admin by — January 19, 2021 in Insurance 0

The January 2021 reinsurance renewals have seen widespread price increases that often went beyond claims inflation, according to Fitch Ratings. It said the reinsurance market continued to harden, driven by pandemic-related claims, high natural catastrophe losses and pressure on liability lines of business. However, Fitch said the increases were capped by abundant capital in the market.

“Both traditional and alternative reinsurance capital were largely unchanged during 2020, despite heavy losses caused by the coronavirus pandemic and by natural catastrophes. Capital injections of over $20bn and a recovery in financial markets helped to maintain the reinsurance capacity at the levels of early 2020, proving the resilience of the market,” said Fitch.

The ratings agency said it believes that real price improvements will reach 2%-4% in 2021, leading to better technical results for reinsurers, assuming a normalised natural catastrophe claims level. Natural catastrophes caused approximately $76bn of insured losses last year, while manmade losses accounted for $7bn of claims in 2020. Total large losses were 25% above the long-term average.

Fitch Ratings said the sector outlook on the non-life London market is improving for 2021. “This reflects our expectations of continued improvements in pricing conditions, which would support the underlying underwriting performance of the market. However, despite the positive pricing dynamic, there are a number of challenges, including the uncertainty over the ultimate costs of coronavirus pandemic-related claims, the pandemic’s recessionary impact on the sector, and ultra-low investment yields.”

Fitch said rate increases accelerated further in the third quarter of 2020, with a number of insurers reporting double-digit rate increases across underwriting portfolios. “We believe the uncertainty over the pandemic-related claims costs, the ultra-low interest rate environment and improved underwriting discipline in the London market will support rate rises in 2021. Several London market insurers have also raised additional equity capital in H1 2020 to take advantage of the hardening market.”

Patoma Admin by — January 18, 2021 in Insurance 0

By admin

The hardening reinsurance market could mean higher prices for corporate insurance buyers into 2021 and signal a period of restricted coverage and reduced underwriting flexibility. The hardening reinsurance market is likely to exert more influence on the primary commercial P&C and specialty markets than has been the case in previous years, according to Clarissa Franks, managing director and risk management placement leader at Marsh UK.

“Reinsurance is vital to insurers’ ability to operate and is a key operational expense. As insurers seek to improve profitability, it may not be feasible for insurers to absorb additional reinsurance costs, which may result in price increases for buyers,” she told Commercial Risk Europe.

Changes in the direct and facultative reinsurance market during the past 18 months have affected the ability of some insurers to offer the same level of cover they once could, according Ms Franks. Now the treaty market, the mainstay of reinsurance protection for most large insurers, is also showing signs of change, she explained.

Many specialty property insurers had come to overly rely on facultative reinsurance, which is traditionally used by primary carriers to address specific risks or regions such as high concentrations of catastrophe risks, or very large corporate insurance programmes, according to Ms Franks.

However, following a run of catastrophe losses in 2017 and 2018, as well as efforts by Lloyd’s to root out underperforming business, the facultative market has contracted, forcing some insurers to suddenly adjust line size and capacity, she explained.

Perhaps more significantly, treaty renewals in the second half of 2020 point to further changes in the reinsurance market, with price increases and coverage restrictions in some “topical areas”, said Ms Franks. “The ramifications for P&C and specialty treaty renewals so far this year has been for coverage and exclusions for communicable diseases,” she said.

“The theme coming through is that there may be a level of inflexibility from insurers due to reinsurance conditions,” said Ms Franks. “If you are a corporate buyer, you will be used to getting bespoke cover. Now, some cover – like communicable diseases or silent cyber – may not be available, no matter how confident the underwriter is, because there is no longer reinsurance protection available,” she said.

Treaty reinsurers are mandating exclusions for communicable diseases in some lines, as well as for silent cyber and civil unrest in property coverages, Ms Franks continued.

“Now, insurers have little choice as reinsurers are mandating exclusions. This is true for silent cyber, where reinsurers seek to identify and minimise cyber cover in non-cyber P&C insurance,” she said.

Reinsurance capacity remains adequate for most lines, however, it is “tightening” for certain loss-affected areas, such as financial, retro and US auto, according to Ross Howard, global executive chairman of Lockton Re. Risks that have experienced major losses are “truly hard”, he told CRE.

For example, reinsurance capacity for directors and officers insurance is “seriously tightening” as a number of players have withdrawn from the market, making it harder to place programmes. Reinsurers are also growing more cautious of cyber exposures, in part due to a rise in ransomware claims and concern for systemic risks, exacerbated by the pandemic, according to Mr Howard.

Specialty lines with poor loss records are under increased scrutiny and subject to price increases, according to Gianfranco Lot, head of globals, reinsurance at Swiss Re. Marine, energy and aviation, as well as specialist property areas like engineering and mining are undergoing a “correction”, while trade credit insurance is in sharp focus given the impact of the pandemic on the global economy, he said.

Like other reinsurers, Swiss Re is taking a tougher stance on casualty reinsurance at renewals, in part a reflection of social inflation and low interest rates, according to Mr Lot. “The US liability market is hard. Capacity in the reinsurance market has reduced and reinsurers are demanding improved conditions. Prices have been pushed up in the past 18 months and we expect they will do for some while longer,” he said.

Faced with higher reinsurance costs, insurers have a number of options. These include passing on the additional costs, absorbing increases or restructuring their reinsurance programmes and primary insurance offerings. “Increased reinsurance pricing will, at the very least, help sustain pricing on the primary side,” said Michael Van Slooten, head of business intelligence at Aon Reinsurance Solutions.

“Reinsurance buyers will have to pay more for their cover, but I would argue that they are receiving enough at the front end to cope. There does need to be a catchup as reinsurers’ earnings are well below expectations,” he added.

Changes in the reinsurance market are driven by the need to address poor results, according to Mr Van Slooten. Reinsurers’ earnings have fallen due to a combination of factors, including catastrophe losses, social inflation, low interest rates and the effects of almost a decade of market softening, which eroded premium rates by as much as one third in some lines, he said.

“The reinsurance sector remains well capitalised despite a run of losses, which has helped keep a lid on rates. But we are at a point where tolerance of poor earnings has gone and management teams are under pressure to increase earnings. Increasing today’s pricing is really the only lever left to reinsurers,” he added.

Unlike past hard market cycles, current hardening is not a consequence of falling capacity, explained Mr Van Slooten. In fact, reinsurance market capital has proved resilient despite the pandemic, and some new capital has flowed into the market. According to Aon, global reinsurer capital was broadly flat during the nine months to 30 September 2020.

Despite recent catastrophe events and a global pandemic, reinsurers remain well capitalised, agreed Carlos Wong-Fupuy, senior director of global reinsurance ratings at AM Best. He expects the hard market to continue throughout next year.

“In order to compensate for previous losses, we would expect the hardening market to last through 2021. This assumes a continued period of historically low investment returns, a required return on capital aligned with a more uncertain underwriting and economic environment, and improved market discipline, with no material influx of naive capacity,” he added.

In response to hardening rates, there have been a number of capital-raising initiatives and startup (re)insurance companies formed. For example, in December, Inigo and Vantage were launched with $800m and $1bn of capital respectively, while Conduit Re floated in London with a $1.1bn capitalisation.

“While not insignificant individually, currently they do not represent a material addition to the $470bn that we estimate as combined capital for the whole market. Combined with the existing third-party capital capacity – which may marginally decline this year, we still anticipate in total a slight reduction compared to the previous year,” said Mr Wong-Fupuy.

“Given the current global pandemic and economic situation in general, we believe most new entrants may face a challenging environment dominated by a flight to quality that favours more established, highly rated competitors,” he said.

Reinsurance market conditions will contribute to higher prices in most commercial lines in 2021, but there are a number of other trends contributing to continued upward trajectory of prices in the insurance market, said Jennifer Marshall, director at AM Best. “It’s difficult to separate the specific effect of the hardening reinsurance market from those other trends but, clearly, the reinsurance market is contributing to the dynamic,” she said.

“We expect that insurers will carefully re-evaluate their reinsurance needs, and it’s likely that there will be some increased retentions and reductions in excess layers, particularly for more opportunistic buys made when reinsurance market conditions were softer. This may drive some change in primary market capacity, as insurers reduce availability of increased limits and excess coverage. Changes in insurance policies, particularly bespoke programmes for large commercial insureds, may be needed if reinsurers implement and maintain stricter policies about what underlying exposures they will cover,” she added.

Patoma Admin by — January 18, 2021 in Insurance 0

Allianz has set interim targets to reduce greenhouse gas emissions in its investment portfolio, to help achieve its ultimate goal of climate neutrality by 2050.

The insurer said it wants emissions from equities and corporate bonds held in its customer funds portfolio to fall 25% by 2025, from 2019 levels.

The insurer said all equities and corporate bonds will be reviewed for compatibility with the Paris 1.5ºC climate agreement. Companies that also follow the agreement will “increasingly be held” in its portfolio, it explained.

In addition, the firm’s real estate investments will also be measured against the Paris climate agreement’s target.

Allianz will also reduce climate gases from its own operations by 30% in the next five years, compared to 2019, and only use green electricity in business operations by 2023.

“With change, we start with ourselves – to then support others to move towards carbon neutrality. We are convinced that integrating climate and sustainability aspects will have an impact on our investment strategy,” said Dr Günther Thallinger, member of the Allianz board of management responsible for investment management and ESG. “This allows us to mitigate climate-related risks and take advantage of opportunities offered by future-oriented business models,” he added.

Oliver Bäte, chairman of the board of Allianz, said: “The past year has clearly shown: markets and countries must learn to deal with new risks such as pandemics, climate change and social unrest. It is the most important task of the coming decade, to shape a sustainable economy and society.”

Allianz also announced Line Hestvik will lead the firm’s global sustainability work in the new role of chief sustainability officer. She will report directly into the board of management and roll out Allianz’s sustainability strategy across all markets.

Patoma Admin by — January 14, 2021 in Insurance 0

By Favour Nnabugwu

Three Ghanaian insurance companies have decided to merge into a new entity called Star Assurance Group Limited (SAGL).

The companies are Société Tunisienne d’Assurances et de Réassurances (STAR)  Assurance Company Limited, StarLife Assurance Company Limited and Star Microinsurance Company Limited

Established in September 2020, SAGL intends to play a significant role in the local market.

The written premiums net of cancellations and refunds amounted to 374.76 million TND ($133.767 million) compared to 357.39 million TND ($118.739 million) in 2018, that is an increase of 4.9 percent. With 216.202 million TND ($77.171 million), motor insurance alone accounted for 57.69 percent of the premiums.

The paid losses, all classes of business together, rose by 9.9 percent at 289.872 million TND ($103.467 million) in 2019 against 263.693 million TND ($87.609 million) one year earlier, The number of reported losses (for all classes) fell from 884 686 in 2018 down to 816 527 twelve months later.

For their part, the financial products grew by 26 percent amounting to 77.719 million TND ($27.741 million) versus 61.56 million TND ($20.453 million) 2018.

The privately owned company was incorporated in August 1984 and licensed to carry out corporate and retail insurance business in Ghana. It commenced operations in April 1995.

Star Assurance started business as a composite insurance company and had to hive off its life operations by setting up a subsidiary company, StarLife Assurance even before a new law was enacted in 2006 to separate its life insurance business from the non-life business. 

As a result of these structural changes, a new business strategy was implemented. Star Assurance improved its financial status, upgraded its operational infrastructure, improved the skills of its over 150 professionals among others. The business simultaneously further extended its national presence and invested in technology and product distribution to enhance its operations and deepen penetration of insurance products and services to the Ghanaian market.

Star Assurance currently has seventeen (17) branches in seven (7) regional capitals of the country. The insurer also has over 150 agency offices located across the country. As part of their plans to increase penetration of insurance products and services in the market, as well as take insurance closer to the insuring public, Star Assurance is planning to open more branches before the end of the year

Star Assurance is poised to establish itself as a clear market leader in the small and medium-sized enterprises market as it sees Ghana’s large SME sector as a key driver of growth in the industry. The insurer also plans to consolidate its position in the industry through continuous investments in IT infrastructure and human capital.

Patoma Admin by — January 13, 2021 in Insurance 0

The Chartered Insurance Institute of Nigeria (CIIN) has threatened to withdraw professional certificates from practitioners with abberations

The President of the Institute, Sir. Muftau Oyegunle, during the CIIN’s 2020 graduation and fellowship awards ceremony in Lagos, pointed out that the certificates can be withdrawn from the holders if the Institute has good reasons to do so.

He stated  that reason for such withdrawal of certificates could emanate from acts unexpected of a holder of the Institute’s professional qualification and unethical behavior. This policy remains in force. I sincerely hope that there will not be an occasion where the Institute is required to do so, he said.

According to him, “All certificates issued by the Institute remain the Institute’s property, stressing that, “As we have been appointed the power to give, we have equally been empowered with the mandate to retrieve or revoke.”

Practitioners must at all times maintain decorum among insurance professionals is the principal way to improve corporate governance and ultimately improve the public image of the insurance business, he said.

The CIIN president said that by attaining the institute’s professional qualification, the inductees have become custodians of the ethics and codes of practice of the noble profession and that the institute has a code of ethics for insurance practitioners in Nigeria, which purpose is to set forth the values, principles and standards that will guide the conduct of all insurance practitioners.

Patoma Admin by — January 12, 2021 in Insurance 0

By Favour Nnabugwu

DESPITE enormous challenges, the insurance industry at the global level and in Nigeria, have been reporting unprecedented growth in both life and non-life insurance segments.
According to the industry data, the Global Insurance Industry maintained steady growth in 2019 as premiums increased by 3.0 percent to $6.3tn after crossing the $5.0tn mark in 2018. This represented 7.2 percent of Global GDP.
Growth was supported by the improvement in both life and non-life insurance segments in China and the non-life segment in advanced markets.
The non-life segment recorded an impressive 3.5 percent growth in premiums to $3.4tn in 2019 while life insurance premiums grew by 2.2 percent to $2.9tn.
Across regions, emerging markets led the growth in premiums with China reporting 5.6 percent and 12.0 percent increase in life and non-life premiums respectively.
Declining yields on treasury instruments due to the accommodative monetary policy of global systemically important central banks pressured life insurance profitability in 2019.
However, improved pricing and underwriting conditions supported the profitability of non-life insurance.

Nigeria

The National Bureau of Statistics, reported that in the Nigerian Insurance sector, growth was faster than the country’s economic growth of 2.3 percent, as the sector expanded 3.6 percent in 2019 from 6.1 percent in 2018.
And according to the NIA, the volume of business written by insurers last year rose by 15.55 percent to NGN490bn ($1.3bn) in terms of premiums in 2019, compared to N365.1bn in 2017, with the life segment primarily responsible for the impressive growth.
The industry operators say that the growth could not have been possible without the concerted effort of the regulatory body and the key players in the industry.

What They Did

The Commissioner for Insurance,Mr. Sunday Thomas repeatedly told the newly licensed insurance and reinsurance companies to develop innovative products. Over the years, insurance operators have remained stuck in time and failed or refused to design innovative new product unlike their counterparts in South Africa.
Therefore, in order to get more Nigerians (individuals and enterprises) to understand and buy insurance products, the National Insurance Commission (NAICOM) and some committed players in the industry have in recent years, research and develop new strategies to boost growth , especially penetration and density.

NAICOM’s micro-insurance companies

Mr. Thomas, noted that to leverage the nation’s large and growing population to boost growth, it is pertinent that micro-insurance policies – which are specially designed for the low-income market, micro and small-scale enterprises- are promoted.
In this regard, NAICOM recently licensed two full-fledged micro-insurance companies, GOXI and Cassava Micro-insurance companies, to offer life and general micro-insurance services in Lagos state.
“Alongside the promotion of micro-insurance, we believe less-restrictive Bancassurance guidelines and the removal of the ban on partnership with Mobile Network Operators (MNOs) would allow for low-cost distribution of insurance products and deepen insurance penetration, especially at the low-income segment of the Nigerian market”.
“We see recent developments in the form of the partnership between Axa Mansard & Carbon and agri-business insurance boosting premiums and awareness for the sector, although there are inherent risks.,” he said.

Bancassurance

The Commissioner, also lauded the recently inteoduced Bancassurance Model of the Access Bank Plc and Coronation Insurance Plc, pointing out that it will give the insuring public an opportunity be able to get enlightened as to what insurance products they need to have at any point in time, to be able to protect their assets.,”
In a keynote, during the company’s webinar themed ‘ Managing Business Risks at a Time of Uncertainty’, the Commissioner urged the insuring public, especially small business owners, to take up insurance products
in the management of their businesses.
Represented by Mr. Taiwo Adeoyin, Technical Advisor to the Commissioner, he said :
“At this time we are in now, what comes to the mind of everyone is how do I reduce cost, how do I reduce the amount of the expenses I incurred as a business, because there are high inflation and recession”.
However, the rationality paradox theory tells us that sometimes, what we gain in terms of reducing costs could even be more in terms of what we lose.
“You could say that , Oh, this is not the time to take up insurance, this is not the time to insure some assets, but I tell you that at the end of the day, you might end up eating down into your portfolio and into your bottom line, to be able to find your feet in sustainability”.
“At this point in time, it is good to reduce costs but in terms of insurance, we should ensure that all our assets are adequately insured. It’s also important to have a good management framework and be able to manage our insurance assets,” he said.

Rebranding projects

Former chairman of the Nigerian Insurers Association, NIA, said that despite enormous challenges, the industry had continued to perform its role.
“It is expected, because of the various initiatives embarked on by the association in conjunction with other stakeholders such as financial inclusion, microinsurance, the insurance industry rebranding project and Unstructured Supplementary Service Data (USSD), a communications technology to deliver mobile financial services”.
“Also, the Nigerian Insurance Industry Platform for Sale of Third Party Motor Insurance coupled with other strategic efforts by the regulator will further deepen insurance penetration and encourage insurance uptake by the public,” he said.
Smart said that the coronavirus pandemic posed a serious challenge to the association and the entire Nigerian insurance industry.
He explained that the virus had not only disrupted businesses but also forced member companies to activate their business continuity strategies.
“We are happy that our members have responded adequately to the challenges posed by the disease, such as remote working, deployment of technology, use of web conferencing technology for online meetings, maintenance of physical distancing.”
“Social distancing in the work place and sale of insurance policies through online platforms have become part of a new norm,” he said.

Recapitalsation Drive

The industry is undertaking a third round of recapitalisation to boost capacity after two previous exercises in 2003 and 2007.
Indeed, the reason for another recapitalisation is not farfetched: stark realities have made a fresh injection of capital rather inevitable.
The Coronavirus pandemic has disrupted the activities of most companies, including the insurers.
This is why the NAICOM has given insurance firms in the country one more year to recapitalise.
According to NAICOM, “The incidences of Covid-19 pandemic have made it difficult to proceed with the Dec. 31, 2020 recapitalisation deadline.”
The principal objective of the reform is to have bigger and stronger players in the industry with enhanced capacity to reach and cover the majority of the Nigerian populace.
In the meantime, insurance companies are expected to meet at least half of the capital requirements by the end of 2020. The final deadline for full recapitalisation is now September 2021.
This is the third time an extension has been granted since the recapitalisation programme was first announced in May 2019. Initially, NAICOM had extended it from June 30th, 2020 to December 31st, 2020.

Rules of engagement

The recapitalisation programme requires life insurance firms to meet a minimum paid-up capital of N8 billion, up from N2 billion; general insurance companies are expected to increase their paid-up capital to N10 billion from the earlier N3 billion.
Composite insurance (those that operate both general and life insurance) have been asked to recapitalise to the tune of N18 billion as against the pervious amount of N5 billion, while reinsurance businesses are now required to have a minimum capital of N20 billion from N10 billion that obtained in the past

Advertisement

The big insurance companies and the newly registered ones have already met the capital requirements some smaller ones that are yet to meet the recapitalisation target are pushing against it: because of the impact Covid-19 has had on their businesses and their inability to raise the needed capital.
The House of Representatives recently passed a resolution demanding that the NAICOM suspend its planned December 31, 2020 mandatory deadline for the first phase of 50%– 60% of the minimum paid-up share capital for insurance and reinsurance companies.
According to the House of Representatives, “the suspension is expected to last for six months from January – June 2021 and is necessary to give the insurance operators soft landing, as well as cushion the effects of Covid-19 and other unforeseen circumstances they might have suffered.”
Some shareholders too have risen up against the planned recapitalisation and have gone to court. The suit was instituted by the Incorporated Trustees of Standard Shareholders Association of Nigeria and Mr Godwin Anono. They are asking the court to halt any further steps by NAICOM towards implementing the directive for the companies to recapitalise, pending the hearing and determination of the main suit.
It is true that Covid-19 adversely impacted the insurance industry but before Covid-19 it was a well-known fact that insurance companies would be asked to recapitalise since it become obvious that some of them were having difficulties settling claims.

Claims Settlement

Claims settlement is at the core of insurance business. The trust deficiency that the insurance industry suffers today is due to the long-held belief that insurers do not like to settle claims or downright refuse to settle claims.
To build trust in the industry, NAICOM is pushing for the recapitalisation of insurance companies so that claims settlement will be carried out without much acrimony thus encouraging the public to have trust in the insurance industry.
To make things easier for the insurance companies, NAICOM has split the recapitalisation process into two phases with the first phase terminating on the 31st of December 2020 and the second and final phase to terminate on the 30th of September 2021.
Under the recapitalisation guideline, insurance companies must meet 50% of the new minimum capital requirements while reinsurance providers are required to meet up to 60% of the new minimum capital requirement.
Moreno, under the revised guideline, Life insurance underwriters are to have a minimum capital of N4billion by 31 December 2020 and have fully paid-up capital of N8billion by 30 September 2021. General insurers are expected to meet a minimum paid-up capital of N5billion by 31 December 2020 and N10billion by 30 September 2021 respectively.
For Composite insurance underwriters they are expected to have a minimum of N9billion in paid up capital by 31 December 2020 and N18billion by 30 September 2021 while reinsurers have been told to have N12billion in minimum paid up capital by 31 December 2020 and N20billion by 30 September 2021.

Why recapitalise

According to the Corporate Finance Institute, “Recapitalisation is a type of corporate restructuring that aims to change a company’s capital structure. Usually, companies perform recapitalisation to make their capital structure more stable or optimal”.
Recapitalisation essentially involves exchanging one type of financing for another – debt for equity, or equity for debt. One example is when a company issues debt to buy back its equity shares.”
Recapitalisation are usually required to reduce financial burden; to prevent hostile takeover and for reorganisation during bankruptcy.
This is why the Federal Government of Nigeria through NAICOM decided to increase the minimum share capital of insurance companies. Therefore, a transparent process where interested investors can visit your website or through your social media accounts know the status becomes imperative.
Most insurance operators believe that “The decision to extend the deadline is reasonable under current circumstances. The coronavirus pandemic has ravaged global economic and financial systems thus making it more difficult for an already unattractive insurance sector to raise much-needed capital.”
“We note that several players have initiated the process of raising the needed funds from their existing shareholder base via the right issues. However, we highlight that some of the players currently have a negative book value of equity and are trading below their par values. Hence, raising equity capital does not appear feasible. That said, we expect to see a flurry of mergers and acquisitions in the industry once conditions become more favorable,” they said.
However, at 0.3 percent, Nigeria has the lowest insurance penetration level amongst notable African countries. Currently, South Africa is at 14.7percent, Kenya at 2.8 percent, Angola at 0.8 percent and Egypt at 0.6percent. Similarly, the sector’s insurance density is still one of the lowest when compared to its peers.
While receiving the licence issued to Heirs General Insurance, the chairman Tony Elumelu said the new insurance company will develop products.
According to him, “That is one of the things we will bring to the sector. We understand market research, we understand what consumers want, we know how to reach them and surpass their expectations and there is always room for improvement especially with technology.”

Conclusion

It is true that the insurance industry was badly affected by Covid-19, however before the coronavirus pandemic struck, the insurance industry had been suffering from existential threats which can only be addressed through recapitalisation.
These include: obscurity – out of the 57 Insurance companies and two reinsurance companies in Nigeria, less than half advertise their products. Fraudulent small players –fringe insurance players with little or nothing to lose swindle innocent policyholders thus giving the industry a bad name and reputation.
Low premium, poor assets– because many insurance companies receive premiums below market value, they are unable to invest in quality assets that will help them generate income and weak product development. One issue that kept on recuring during the licensing of new insurance companies in November 2020 was lack of innovative insurance products that will attract policyholders to the industry.
The Commissioner for Insurance believes that with recapitalisation of the industry and more capital to play around with, the management of insurance companies can now in campaigns or adverts, force small fraudulent insurance companies to either emerge and be reckoned with or be acquired by bigger credible players and recruitment of smart innovative staff to help drive market value premium for better asset acquisition.
Truly, If successfully executed, the planned recapitalisation will result in the ability of companies to underwrite bigger risks e.g., in oil and gas, improve settlement of claims and sensitise the public through continuous marketing on the need to buy more insurance policies.

Patoma Admin by — January 12, 2021 in Insurance 0

By admin

A majority shareholder in AIICO Insurance Plc, DF Holdings Limited, has acquired additional shares of the underwriting firm.
The transaction occurred on Thursday, December 31, 2020, a notice from the company and pasted on the Nigerian Stock Exchange (NSE) revealed.
It was disclosed that DF Holdings bought a total of 474,603,596 units of the company’s stocks at N1.17 each, amounting to N555.3 million.
DF Holdings is owned by Mr Dele Fajemirokun, a Nigerian businessman, entrepreneur, investor, venture capitalist and philanthropist.
The graduate of Business Economics from the prestigious University of Ife (now Obafemi Awolowo University) in Ile-Ife, has more than four decades of extensive business building and wealth creation experience, both within and outside Nigeria; having built a business empire that is unique in comparison to conventional businesses.
He has cultivated and invested in a number of best-in-class companies in Nigeria; amassing a plethora of high-performance enterprises in key sectors of the economy including insurance, telecommunications, oil and gas, agriculture, the supply food chain and manufacturing.
Notable among these are the American International Insurance Company, (AIICO Plc), Food Concepts & Entertainment Plc (owners of Chicken Republic), Xerox Nigeria (now XHS), Johnson Wax (makers of Baygon & Raid insecticides), Kings Guards Securities Group Limited (one of the largest employers of labour, employing more than 25,000 people across the country in both private and public companies and parastatals, assets and difficult terrains), Logic Science Limited, FSS Gases Limited and BlueChip Communication Limited.
He is currently serving as Chairman/Director on the board of all these companies, and many others, totalling 43 companies overall.
His son, Mr Babatunde Fajemirokun, who the third generation of the Fajemirokun tree, is currently the Managing Director of AIICO Insurance Plc.
The United Kingdom-trained boardroom guru was once a visiting lecturer in the Division of Economics & Enterprise in Glasgow Caledonian University.
He has transformed the insurance company since assuming office, attracting investors, including LeapFrog III Nigeria Insurance Holdings Limited, which came into the company through a private placement, with the purchase of about 4.4 billion units of AIICO Insurance stocks at N1.20 each last year.
This deal increased the total issued and fully paid-up shares of AIICO Insurance Plc to 11,330,204,480 ordinary shares of 50 kobo each from 6,930,204,480 ordinary shares of 50 kobo each.

Patoma Admin by — January 12, 2021 in Insurance 0