Recapitalisation: Job losses loom in insurance industry
Many workers in the insurance sector may lose their jobs due to the loss of business by most of the underwriters.
Some of the operators, who spoke to our correspondent on the development, said the loss of insurance business, which many of them were currently grappling with might get worse and lead to the collapse of their operations.
According to them, the trend started when the National Insurance Commission decided to order a backdated recapitalisation in the sector.
NAICOM had announced new capital requirements of N6bn for Tier 3 operators, N9bn (Tier 2) and N15bn (Tier 1) for life, non-life and composite insurance companies from the previous N2bn, N3bn and N5bn, respectively.
Some of the operators, who spoke with our correspondent, said that while they were not opposed to the recapitalisation of the firms, they found the deadline of barely one month given to them to recapitalise as unacceptable.
They also kicked against the requirement that the 2017 solvency accounts of the companies should be presented for the recapitalisation when the announcement was only made on August 28, 2018.
NAICOM stated in the recapitalisation guidelines that only Tier 1 companies would be allowed to underwrite annuity, oil and gas (oil related projects, exploration and production), and aviation insurance, unlike before when all the insurance companies participated in the risks.
Operators told our correspondent that insurance brokers, who controlled over 70 per cent of the businesses in the industry, were already informing the Tier 2 and Tier 3 companies that they would not renew other businesses with them, as they were not sure of their survival if they continue to lose major deals that used to earn them huge premium.
Most companies with Tier 2 and Tier 3 capital lamented that they were already losing business to Tier 1 firms, and might eventually not be able to pay the salaries of their workers again.
In an open letter written to NAICOM by the Association of Senior Staff of Banks, Insurance and Financial Institutions, an affiliate of the Trade Union Congress of Nigeria, and signed by its National President, Oyinkan Olasanoye, and acting Deputy Secretary General, Yekeen Shitu, it warned the commission of the dangers of implementing an emergency recapitalisation in the insurance sector.
The ASSBIFI letter was titled, ‘An open letter to NAICOM on recapitalisation of insurance companies in Nigeria, the tier-based minimum solvency capital: A call for review of period of implementation in order to save the insurance companies and jobs’.
The association noted that its position was not to stop the government from implementing the recapitalisation, but that it should be done in a way that the concerns of all sides would be genuinely and thoroughly looked into.
“We call on the government to immediately extend the period of the implementation of this new tier-based minimum solvency capital regime. We request a genuine consultation with all the stakeholders in this matter with a view to fashioning out the most acceptable way to go about the government’s plans without job loss,” the letter read in part.
According to the association, the inconsistency in policy by the regulator and the hasty move to conduct the recapitalisation may cause some insurance companies serious problems and have negative effects on the economy.
Sources told our correspondent that some of the operators might take legal actions against the commission if it failed to listen to their cries.