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Insurers Recapitalisation: NIA Team Visits NGSE, Woos Investors, Explore M&As

Council members of the National Insurance Association (NIA), a trade group in the country’s underwriting industry, were at the Nigerian Stock Exchange (NSE) Tuesday to woo investors to the ongoing recapitalization exercise in the sector which will enable them meet the new capital base set by the National Insurance Commission (NAICOM), the industry regulator.
Led by Tope Smart, its chairman, and group managing director/chief executive of NEM Insurance Plc, the opportunity of the visit was also used to introduce its newly appointed council members to the capital market community.
They joined Smart to perform the closing gong ceremony, just as he spoke on the ongoing industry recapitalization, which members agreed to participate in, following which they are already submitting their plans to NAICOM.
Smart noted that the recapitalization exercise may result in mergers and acquisitions, an option some of the 23 existing operators are already exploiting, just as others are undertaking fresh capital raise to meet the new requirement.
The increased capital, he assured, will enable Nigerian insurers to undertake big-ticket transactions that are currently the exclusive preserves of foreign players.
Recall that NAICOM was at the weekend in Ijebu-Ode, Ogun State, lamenting that Nigeria’s insurance industry may lose 72% of the underwriting business in the Dangote Oil Refining valued at an estimated $6.8bn to foreign operators when it becomes operational. This is blamed on the low capacity to underwrite bigger risks in the Nigerian market.
NAICOM is also worried that domestic insurance might lose the $8bn energy insurance business of oil and gas companies for the same reason, in addition to 90% of the aviation refueling liability insurance from II Plc (former Mobil Oil Nigeria Plc) valued at $1.0bn, among others.
Smart assured existing and potential investors of the huge growth opportunities in the nation’s underwriting industry waiting to be tapped, which will result in robust income and profit, following investors will reap returns in the form of dividend payout and capital appreciation at a time most insurance stocks are selling below their par value.
For him, insurance companies may not be doing well at the moment, but the additional capital to be injected from the ongoing exercise, “will greatly enhance their capacity (to undertake big-ticket transactions), which will translate to income and profit eventually,” he stressed.
“Our members are working seriously to meet the recapitalization deadline,” he continued, adding that the fresh capital will also help address issues such as poor market penetration.
The fresh capital being sought, Smart continued, will be invested in IT infrastructure, bank assurance and opening of more branches across the country.
The NEM Insurance boss said private equity investors are already making inquiries, as they seek to benefit from the various opportunities the exercise throws up.
“Some have come in and others are aspiring to do same,” he stressed further, noting also that some insurance companies plan to recapitalise by way of a rights issue.
He, however, added that members of the NIA are already engaging NAICOM, urging for an extension of the deadline, given that there are some statutory notices which must be filed with other regulatory agencies that cannot be fast-tracked.
The exercise, Smart assured will translate to new listings on the NSE, even as he made a case for Health Management Organisations (HMOs) who believe that meeting the capital base set for their category will be a tall order, given the low penetration of health insurance in the country.
For him, this is the best time to invest in the Nigerian insurance industry.

Photo caption: Tope Smart, Chairman, Governing Council, Nigerian Insurers Association (NIA) and Group Managing Director, NEM Insurance Plc (middle), striking the closing gong to declare trading on the Nigerian Stock Exchange (NSE) closed, during the Closing Gong Ceremony to introduce the newly appointed council members of the Association to the capital market stakeholders at the NSE on Tuesday. He was accompanied from left: Val Ojumah, council Member and MD/CEO, FBN Insurance Ltd; Dr. F.K Lawal, member, and MD/CEO, Sterling Assurance Ltd; Oscar Onyema, Chief Executive Officer, NSE; Mrs. Yetunde Ilori Director-General/Chief Executive Officer, NIA; Mrs. Yinka Adekoya, another Council Member, and MD/CEO, WAPIC Insurance Plc; as well as Mrs. Bola Odukale, MD/CEO, Capital Express Assurance Limited.

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