Insurance

How NAICOM rejected operators’ lobby on admissibility of properties in recapitalisation

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Chuks Udo Okonta

The National Insurance Commission (NAICOM) has disclosed how some insurance operators engaged the services of a consultant to pressure it into lowering rules on non-admissibility of properties as assets in the ongoing recapitalisation exercise.

The Acting Commissioner for Insurance, Sunday Thomas, who said this at an event in Lagos recently, noted that the commission had to turned down the lobby based on its commitment to ensure there is no hiccups in the recapitalisation.

Thomas noted that there are companies today that are in distress not because they do not have the assets to match their liabilities, but the structure of the assets is ineffective. “So, is it that we do not recognize the nature of our business? It is amazing, as some people still say we do not know why NAICOM should restrict our investments in property.

“To the extent that the industry mobilized FMDQ to appeal to us to loosen the provision of the law. It must not be done that way, because the fund belongs to people. We have companies that have put so much in properties, but we all know the state of the property market presently. We should ask ourselves how easily can we realize funds from these properties,” he said.

One of the underwriting firms, that had before now locked-up its capital in real estate is Axa mansard, which according to AM Best, had its capital consumption significantly influenced by its real estate holdings, which in 2018 equated to 73 per cent of its capital and surplus.

“AXA Mansard’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by BCAR. Capital consumption is significantly influenced by the company’s real estate holdings, which in 2018 equated to 73% of its capital and surplus. However, AM Best expects that AXA Mansard will significantly reduce its allocation to real estate over the medium term, which would have a positive impact on its future BCAR. The balance sheet strength assessment also considers AXA Mansard’s exposure to the high levels of economic, political and financial system risks that are associated with operating in Nigeria,” the rating firm said.

To ensure the firm scale through the recapitalisation hurdles, the shareholders had recently approved a divestment plan that involves sale of the insurance company’s real estate investments and pension management subsidiary.

At the extraordinary general meeting in Lagos, shareholders unanimously mandated the board to divest from AXA Mansard Pensions Limited, the group’s pension management subsidiary. Shareholders also authorised the directors to divest from real estate investment, without necessarily outlining the specific real estate assets.

The meeting authorised the directors to appoint such advisers, professionals and parties that they deem necessary, upon such terms and conditions that the directors may deem appropriate with regard to the sale of the subsidiary and real estate assets.

According to shareholders, the board of directors is “authorised to take all steps and do all acts that they deem necessary for the successful implementation” of the above resolutions on sale of AXA Mansard Pension and real estate assets.

Cornerstone insurance Plc, had recently sold one of its properties, which had helped placed the firm on a comfortable financial position in the recapitalisation. Niger Insurance had also put one of its properties in Abuja for sale to enable it raise the required capital to remain afloat post recapitalisation.

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