The National Insurance Commission (NAICOM) has approved the recapitalisation plans of 44 out of the 54 Insurance companies in Nigeria.
Mr Agboola Pius, Director, Policy and Regulation, NAICOM, said this at an interactive session with shareholders to update them on the 2019 recapitalisation directive, in Lagos.
Pius said that the commission had also rejected the recapitalisation plans of six insurance companies and directed them to make amendments.
He said that the plans of two companies were also under review, while two companies had not submitted any plans at all to the commission.
According to him, there are possibilities for the insurance firms to still review their capital restructuring plan and resubmit for approval, but within a reasonable time frame.
Pius said that the commission saw the need for the recapitalisation to increase the retention capacity and conservation of foreign exchange earning of the insurance companies.
“The retention capacity is the maximum amount of risk retained by an Insurer per cover and the capital size of an underwriter.
“When the insurance companies are well solidified, they can retain most of the risk in the country,” he said.
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 as: Initial Public Offering (IPO), right issues, capitalisation of retained earnings and other means such as 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.
“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,” he said.
The NAICOM director assured the shareholders that the commission had developed appropriate framework to ensure that their investments