By Favour Nnabugwu
NINE years after the last recapitalisation exercise in the nation’s insurance industry, the Minister of Finance, Mrs. Kemi Adeosun, yesterday said that the sector was due for another round of recapitalisation following the need to reposition it.
Adeosun said this at the opening ceremony of the National Insurance Conference organised by the sector’s Insurance Industry Consultative Council (IICC) with the theme ‘Expanding National Resources and Infrastructure in Challenging Times’ held in Abuja.
The minister who was yet to put a figure to the recapitalisation required according to classes of insurance, told insurance operators that there was no alternative to recapitalisation of the sector
The minister said there was need for recapitalisation of most insurance companies.
She said “the first top three banks in the country have over N30 billion capital base each while the top three insurance companies’ capital base is between N20 and 25 million each.”
It would be recalled that Insurance companies in Nigeria in 2007 increased their capital base of Life, non-life and composite firms from the initial base of N150m, N200m and N350m to N2billion, N3billion, and N5billion, respectively. Four reinsurance firms were asked to recapitalise from N350million to N10billio during the exercise.
Continuing, the Minister said that the principal objective of the reform is to have emergence of bigger and stronger players in the industry with enhanced capacity. The Nigeria insurers in time past had operated on marginal scale and that accounted for why the market had not benefited much, especially from oil and energy business.
She said “The principal objective of the reform is to have emergence of bigger and stronger players with enhanced capacity, restoration of confidence of the public, enhance the international competitiveness of local operators. Adeosun argued that the industry was under-performing, compared to its pension and banking counterparts. She identified low awareness as one of the factors responsible for the under-performance of the sector, pointing out that out of 57 insurance companies in the country, less than 23 advertised their products.
She said, “There is need to immediately address the issues responsible for the under-performance “because a 0. 33 per cent increase in insurance penetration can result to a growth of 0.5 per cent in GDP.. Adeosun noted that the increment was capable of creating over 70,000 jobs annually.”
She stated that one of the inhibiting factors to insurance was low awareness which caused under-performance of the sector, pointing out that out of 57 insurance companies in the country, less than 23 advertised their products. According to her, “The companies put in less than 20 adverts on television, less than 10 adverts on radio and less than 10 adverts on social media.
“Other factors include poor distribution channels and unethical practices among operators. I am working vigorously with the National Insurance Commission (NAICOM) to ensure that premium discounting is eliminated among practitioners,” she stated.
Earlier, the Commissioner for Insurance, Alhaji Mohammed Kari, commended the IICC pledging NAICOM’s commitment to making the industry the next growth area for economic development