Officials of UT Life and LeapFrog Investments after the ceremony
The National Insurance Commission (NIC) is pushing for mergers in the insurance industry in a bid to make companies in the sector more efficient.
The commission, which is the regulator of the industry, argued that presently many players in the industry were too small and could not operate efficiently, hence the need for mergers.
In an interview on January 27, the Deputy Commissioner of the NIC, Simon Nerro Davor, said: “What we have realised for the past four years is that our insurance companies that operate in the country are very small and because of that they are inefficient. For them to operate efficiently, their capital levels currently are too low.”
As a result of this inefficiency, he said the commission had reviewed the minimum capital of the industry to GH¢15million to ensure that operators have a strong capital base to operate with and, therefore, companies that did not meet that requirement must resort to mergers.
“What it means is that if your shareholders are not ready to pump in additional capital to meet that level, then the option left for you is to let some external people come and invest in you or you contact other insurance companies who are of similar size and you put your resources together and merge,” he said after a ceremony to mark the merger between UT Life Insurance Company and LeapFrog Investments in Accra.
He added, “Looking at the way the insurance companies operate, if they have GH¢15million, they should operate at some level of efficiency, get the right software, employ the right people, so they can do the right job.”
Mr Davor said by the end of March 2016, the commission would be in a position to identify those that have met the requirement and those who have not and take a decision accordingly.
“That is what we are envisaging and so far some two or three companies have approached us that they want to merge. Some are going outside and others are also getting some investors locally to raise additional capital to meet the requirement,” he said.
He added: “But by the end of March 2016, we shall know the companies which have met the minimum capital requirement, which companies were able to bring additional capital, and those that were able to bring their resources together to merge, then we can find a way forward.”
2016, year of enforcement
According to Mr Davor, the commission has marked 2016 as its year of implementing all laws pertaining to the industry, more especially the law that has to with insurance of commercial properties and premium flights.
“We want 2016 to be a year of enforcement, so we will enforce all the laws in the industry. For instance, let’s look at the compulsory insurance of commercial properties, against fire, flood, earthquake and others. We want to enforce that to the fullest so we are moving to the regions. Last year we were in Accra, Kumasi and Takoradi but this year we are moving to all other regions,” he said.
On the issue of premium flights, he said most of the insurance companies seemed to reinsure their businesses outside the country so the premiums that customers paid were all transferred outside leaving the country with limited resources to work with.
“We are now trying to enforce the law which says that before you transfer premiums outside the country you have to make sure that the local capacity is exhausted. We are trying to enforce it so the amount of premium we send out every year will be reduced,” he said.
UT Life, LeapFrog merger
Pan-African investment firm, LeapFrog Investments, has acquired a majority stake in UT Life Insurance Company Limited.
The merger, according to the Managing Director of UT Life, Mr Kwaku Yeboah- Asuamah, is to present an opportunity for the company to spur its growth further.
It is also expected that through this merger, UT Life would be in a position to meet the GH¢15million capitalisation requirement of the NIC.
“Our vision is to be the most innovative and affordable life insurer for the consumer mass market in Ghana. We believe our partnership with LeapFrog will give wings to our growth plans and enable us to benefit from LeapFrog’s rich insurance expertise and knowledge,” he said.
The Chief Executive Officer of UT Holdings, Mr Martyn Mensah, also added that “LeapFrog is the leader in designing insurance products for the mass market and is made up of an exceptional team of strategic operators. They are the right partner to take UT Life to its next level of growth. We look forward to seeing UT Life reach new heights as a leading force in the Ghanaian life insurance market.”— GB