Rosemary Onuoha

While some banks are still undecided about what action to take regarding their investments in their insurance subsidiaries, the Board of GT Bank Plc seem set to announce its divestment from Guaranty Trust Assurance Plc (GT Assurance).

Mr. Salami Owolabi, Managing Director of GT Assurance told Vanguard that GT Bank is sure to make its position known concerning the bank very soon and the bank has no intention of retaining any investment in the insurance subsidiary.

Owolabi revealed that GT Bank has no intention of transforming into a holding company as some banks are doing, rather the bank will let go of all its investment in the insurance company.

Vanguard investigations reveal that Nigerian banks that have insurance companies as subsidiaries will have to sell out over N200 billion worth of investments which represent part of their shareholding structures in their insurance affiliates.

The move became imperative following the Central Bank of Nigeria (CBN) directive to all banks to divest from non-banking activities effective May 14, 2012.

Similarly, the National Insurance Commission (NAICOM) has vowed that it will not allow any bank to kill any insurance company by arbitrarily withdrawing invested funds, but rather these funds must be sold out to other Nigerian citizens, associations or foreign investors.

According to the Commissioner for Insurance, Mr. Fola Daniel “It is the expectation of NAICOM that the institutions being divested from, retain sufficient capital to support existing businesses and new ones, that funds for life assurance companies remain intact, that dividend are not paid out without the consent of NAICOM, that risks from the identity, integrity, sustainability and financial capability of any potential new shareholder is dealt with and that the divestment process runs smoothly.”

Analysis of the shareholding structure of some banks in some insurance companies, carried out by Vanguard showed that some banks have 100 per cent control in some insurance firms while others control over 50 per cent of the shareholders funds.

For instance Intercontinental Bank controls over 58 per cent of the shareholding structure of IntercontinentalWapic Insurance Plc while Bank PHB has a 100 per cent control of the shareholders fund of Insurance PHB.

At the close of the recapitalisation exercise in the insurance industry, Life insurance companies were mandated to have N2 billion minimum share capital, N3 billion for General insurance companies while Composite insurance companies will have N5 billion. However, most companies have grown their capital base a lot higher than the prescribed minimum capital base.

At present, 12 insurance companies are affiliated to some banks and they are Adic Insurance Co. Ltd which operates a composite business structure; Fin Insurance Co. Ltd which runs a general business structure; Guaranty Trust Assurance Plc which runs a composite structure; Insurance PHB which operates general business; IntercontinentalWapic Insurance Plc which operates a composite business and Oceanic Insurance Co. Ltd, which is a general business company.

Others are SpringLife Assurance Co. which is a Life company; Sterling Assurance Nig. Ltd. a general business company; UBA Metropolitan Life, a Life company; Union Assurance Co. Ltd, a composite company; UnityKapital Assurance Plc, a general business company; and Zenith Insurance Co. Ltd which runs a composite business structure.

As part of its pledge to ensure that no insurance company dies, NAICOM set up an 8-man Committee on the Divestment of Banks from Insurance entities to review and identify the risks and challenges of implementing the divestment of banks from insurance companies and it has two months to submit its report.

The committee according to the commission is chaired by the Chief Executive Officer of Leverage Insurance Brokers Limited, Hon. Abraham Lanre Laoshe while NAICOM’s Deputy Director (Corporate Strategy) is Secretary of the Committee. Other members of the committee include Professor Chioma Agomo of the University of Lagos, a Director of Securities and Exchange Commission, Ms, Mary Uduk, former Managing Director of NICON Insurance Corporation, Alhaji Mohammed Kari and former Executive Director of Ecobank Plc, Mr. Segun Aina.

The rest are the Director-General of the Nigerian Insurers’ Association (NIA), Mr. Sunday Thomas and the Deputy Commissioner for Insurance, Mr. George Onekhena.

Inaugurating the committee in Lagos, Daniel said the move is to ensure that the industry meets and even surpasses the challenges of the divestment order handed banks in the country by the CBN. He assured that members of the committee are people who are not actively involved in either banking or insurance business and such there would be no conflict of interest in the course of their work.

According to him, the committee is mandated to review the impact of the CBN directive on banks-owned insurance companies and identify the risks and challenges in the implementation of the divestment from the perspective of policyholders’ protection and corporate governance.

In addition, they are also to prescribe measures that the insurance regulatory body can put in place to avoid or mitigate the impact of any identified risks and recommend any other measures that will be necessary in the implementation of the divestment in the interest of the growth of the Nigerian insurance industry.