This, however, confirmed the story published yesterday, on possible review of the recapitalisa- tion exercise as well as possible dead- line extension.
According to a circular made available yesterday and sent to all insurance and reinsurance companies in the country, the decision was necessitated by the incidences of COVID-19 Pandemic which has made it difficult to proceed with the 31st De- cember, 2020 recapitalisation deadline.
NAICOM, in the circular, said, a re- view of the recapitalisation deadline, therefore, became imperative in order to mitigate likely negative consequences of the pandemic on the exercise, adding that, the commission has, however, extended and segment the recapitalisa- tion process into two phases “50% of the Minimum Paid-Up Capital for In- surance and 60% for Reinsurance shall be met by 31st December, 2020, while Insurance Companies are required to fully comply with the approved Min- imum Paid-Up Capital not later than 30th September, 2021,” the regulatory body said.
Following this development, Life Insurance companies must have raised N4 billion of the expected N8 billion minimum paid-up share capital by December 31st, 2020, with the remaining N4 billion expected to have been raised by September 30, 2021, to make up N8billion.
Similarly, Non-Life insurance firm must have N5 billion capitalization by December 31st, 2020 and be fully capitalized to N10 billion by September 30, 2020, even as Composite insurer must have N9 billion by December 31st, 2020, while completing it to N18 billion by September 30, 2021.
Reinsurance companies were directed to first raised 60 per cent of their paid-up capital by December 31st of this year, with the remaining 40 per cent expected to have been realized by the end of the exercise in September, next year.
We had earlier reported that this development is not unconnected to the fact that the outbreak has negatively changed the business landscape and dynamics as investors were skeptical on whether to invest in insurance industry currently undergoing recapitalisation, at a time the nation’s economy is knocking on the door of recession.
Similarly, investigation shows that the price volatility in the Foreign exchange market is undermining the valuation and pricing of insurance companies, especially, for those seeking foreign investment to boost their capital base to the new threshold, while local investors are still undecided to invest at this time.
And with some of those multinationals planning to invest in the nation’s insurance sector already badly affected by the impact of the epidemic, casting doubt on their financial capacity to invest by the time the virus subside around August 2020 as predicted, the odd seems against the exercise whose deadline is December 31st, 2020.
Although, there are nine months still left to the deadline date, financial analysts said, the Investment climate the world over is cloudy with some of the investing firms from France, Italy, Spain, U.K, US and other European countries who wanted to invest in Ni- gerian insurance industry before now, either needing their respective govern- ments bailout to stay afloat or needing time to recover financially.
Moreover, the portfolio investors that have long fled the country shore with their investment are yet to return back, thereby, further making it difficult for underwriting firms to raise fund to recapitalise within the next six months.
Although, most companies preferred capital injection through public and private shareholders, the process of regulatory approval for such deals, espe- cially, for the listed entities, according to market observers, takes longer time, which would make extending the deadline the ideal option to give a level playing ground for all.
As it were, findings show that most big insurers are also almost concluding their recapitalisation plans, with about 60 per cent of the low capitalised firms still at the preliminary stage of implementing their recapitalisation plans.
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