Shareholders kick against NAICOM’s new recapitalisation deadline
Shareholders in the insurance industry have rejected the change in the recapitalisation deadline given to underwriting firms to recapitalise from January 1, 2019 to October 1, 2018.
Some of the shareholders, who spoke with our correspondent in separate interviews, said while they were not opposed to the recapitalisation of the insurance companies, they totally opposed the deadline of barely one month given to them to recapitalise.
They also kicked against the requirement that stated that the 2017 solvency accounts of the companies should be presented for the recapitalisation, when the announcement was only made on August 28, 2018.
According to them, the inconsistency in the policy of the regulator and hasty move to conduct the sector’s recapitalisation may cause some insurance companies serious problems and have negative effects on the economy.
The shareholders, who observed that the new development was causing panic among the operators, said it might affect confidence in the industry if some companies collapse as a result of the inability to renew their treaties.
The Chairman, Nigerian Constance Shareholders Association, Shehu Mikail, observed that many insurance companies were making frantic efforts to recapitalise to tier one.
He said instead of a hasty exercise, the commission should concentrate on confidence building and how the companies should clean up their bad loans.
“It is better for NAICOM to extend it to the next one year after the country’s election period is over,” he said.
He said that the recapitalisation should not be done in a way that could demoralise the staff of the companies, but that NAICOM should ensure that they paid claims.
Mikail said, “I believe it is better for the commission to reverse the deadline and liaise with the insurance companies on how to have a real approach. It will make insurance companies to start doing well, and increase confidence of investors.”
The Chairman, Progressive Shareholders Association, Boniface Okozie, said that the change in date showed inconsistency on the part of the regulator.
He said, “How can NAICOM give one month for companies to plan recapitalisation? Even if they give them one year, it is not good for recapitalisation; you need to give them adequate time. Some of them are selling shares; who is buying it?”
According to him, NAICOM should go back to the drawing board and help the companies to rise up because they need support to thrive.
He said, “NAICOM should give a timeframe. This fire brigade approach cannot work. It will drag the economy back if insurance companies go down today; people will lose billions of investment in that sector.
“NAICOM should be concerned about how to get insurance stocks to bounce back and have value. The October deadline is unacceptable.”
The Managing Director Lancelot Ventures Limited, Adebayo Adeleke, said it was not the best thing for regulators to be changing regulations.
He said, “They must have thought through the entire tier recapitalisation process before coming out to say this is the way to go. They came out and mentioned January 1. Barely three weeks after, they are changing the goal post. That is not even good for the image of the regulator that wants to be taken seriously.”
He said the commission noted that the recapitalisation would be based on the audited account of 2017.
Adeleke explained that NAICOM would use the solvency capital of each of the insurance companies as at the last audited account and most of the insurance companies would present December 2017 account, and a few would present 2016 account.
“This one is more like a military style and it is more or less like a back-dated issue for that matter,” he said.
According to him, because most companies renew their treaties between November and December, the new deadline will cause a lot of disruptions within the sector because people will not want to renew their treaties with any company that is not covered with the type of business they are doing, like oil and gas, and marine.
Adeleke said, “We thought that the regulator should have given some room for recapitalition like we used to have in the banking sector that had a minimum of 18 months, and then set the projections and see what efforts are being made and which companies are adopting mergers and acquisitions, and then come up with a template to put incentives for mergers.
“Nobody is opposed to recapitalisation because it will help them to undertake big ticket and underwriting, and for us to really participate in the real insurance, we need to have very strong capital base. The issue is the way and manner they have come up with it.”
He added that the deadline had psychologically fragmented the market and put some companies at a very disadvantageous position.
Adeleke said, “A lot of things will go wrong and it will have backlash effect on the economy, there is panic in the industry; senior managers are living because they have looked at the accounts and have seen they cannot be out of tier three. We need to appeal to the authority that we need to do it gradually.”
On July 25, NAICOM announced a raise in the minimum capital base for composite insurance companies (life and non-life underwriters) seeking to get licences to underwrite all risks in the country from N5bn to N15bn under its tier-based minimum solvency capital structure.
Some operators who spoke to our correspondent said they had earlier appealed to NAICOM, and written letters after it announced January 1, 2019 deadline to give them an extension.
They however expressed shock when the deadline was later drawn back to October 1, 2018.
While they emphasised the essence of the recapitalisation, they urged the commission to avoid a hasty exercise and extend the deadline.