By Rosemary Onuoha
Insurance industry operators are now faced with fears of hostile take-overs at peanut with full implementation of the Tier Based Minimum Solvency Capital, TBMSC, next month.
About 37 insurance firms are exposed to this risk as only seven out of over 45 companies could qualify as tier-1 players under the new standard.
While voicing his fears, Chairman of Mutual Benefits Assurance Plc, Mr. Akin Ogunbiyi, said that the development could lead to delisting of insurance stocks on the Nigerian Stock Exchange, NSE.
Ogunbiyi who stated this at an event in Lagos said: “The immediate implementation of the Tier based rating could lead to the hostile take-overs for peanuts especially by foreign investors with short term gains as their focus. There could be crisis of confidence for the entire insurance industry where only about seven of the insurance companies qualify under the new standard, as well as de-listing of insurance stocks from the Nigerian Stock market. Insurance stocks are already classified as penny stocks due to inability to support pricing by regular dividend payments.”
Ogunbiyi said that the development could make it practically impossible to fully implement the provision of the local content law, even as the rebranding project of the insurance industry may suffer a major setback as the public perception of some companies and the entire industry will be affected adversely, and there will be significant job loss.
He said, “As an industry, we need to urgently adopt a value innovation strategy to enable us provide relevant affordable products for our teeming population. My advice is that as a priority, we must align insurance services to the unique lifestyles of our citizenry in all income groups.
“The pension industry which was the traditional business of insurance is a case under reference here. With extant laws introduced in 2004, technical capacity, good governance and best practices; pension assets is now over N7trillion as against N70 billion for the several decades it remained with us.
“I believe today’s shrinking profit pool and the overall performance of our industry can only be checkmated by innovation, technical capacity, healthy competition, adoption of best practices, governance structure and creating ‘blue oceans of untapped new markets’.”