How ongoing recapitalisation will attract N200bn for insurance sector- Oscar Onyema
The Chief Executive Officer of the Nigerian Stock Exchange (NSE) Oscar Onyema disclosed that the ongoing recapitalisation exercise by the insurance companies in Nigeria would have attracted an estimated sum of N200 billion for Insurance Sector at an Insurance Sector Forum organized by the NSE, titled Recapitalisation: A Panacea for insurance industry growth held in Lagos on Tuesday.
Although, he lamented that despite the tractions recorded by the sector across some metrics, it still lags behind some other African countries’ with comparative fundamentals in terms of penetration and density.
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He recalled at the forum hosted by the Exchange that the National Insurance Commission (NAICOM) recently announced the upward review of the minimum paid-up share capital requirement of insurance and reinsurance companies.
He said: “An estimated capital of N200 billion is expected to be injected into the Nigerian insurance industry post-recapitalization with a 400 per cent increase in the minimum capital required for life, 333 per cent for non-life, 360 per cent for composite and 200 per cent for re-insurance.
He said, “While I am optimistic that this directive by the industry regulator would enhance performance, bring about efficiency, innovation and profitability, the industry needs significant support to unleash its growth potential.”
According to Onyema, the ongoing recapitalization and consolidation exercise is expected to significantly impact the industry and equally present new opportunities in mergers and acquisitions (M&A) as well as private equity and public offerings.
He noted that the insurance industry has grown remarkably over the years, generating a Gross Premium Income (GPI) of N448.6 billion in 2018, reflecting a 12 per cent growth from 2017.
The industry also recorded an increase in its asset base by an estimated sum of ₦1.3 trillion as at December 31, 2018, reflecting a 17 per cent Compound Annual Growth Rate over the last three years, according to him.
“The National Bureau of Statistics (NBS), the Insurance sector recorded a nominal growth rate of 6.69 per cent and a real GDP growth rate of 3.96 per cent in Q3 2019 from 4.48 per cent in Q2 2019 and 1.03 per cent in Q3 2018.
“Although this data indicates a positive outlook in the Nigerian insurance industry, the reality and headwinds faced by operators in the sector are quite formidable.
“Many licensed insurers are largely undercapitalized, thus limiting their ability to take on big-ticket in-country risks, as is often required in the oil & gas, marine and aviation sectors,” the NSE boss explained.
He said that consequent of the challenges facing the sector, the insurance industry contributed less than 1 per cent to the Gross Domestic Product (GDP) of Nigeria as at Q3 2019.
He added that with a penetration rate of 0.31 per cent and an insurance density of 6.2 per cent, the sector still lags behind its African counterparts considering that countries such as South Africa have a penetration rate of 14.7 per cent, Kenya 2.8 per cent, Ghana 1.1 per cent and Egypt 0.6 per cent.
Onyema, however, explained that this vacuum amounts to, perhaps, the most remarkable investment case of any industry in Nigeria and that despite present challenges; the sector presents numerous opportunities for enhancing the economic fortunes of the country.
