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The journey to generate and inject fresh fund into insurance companies kitties, would have ended yesterday, but for the court injunctions that suspended the initiative. Chuks Udo Okonta in this report examines what the exercise left behind for the sector in spite the suspension.
Yesterday September 30, 2021, would have remained in history, a day of celebration for many insurers after they had spent over a year, jostling to raise the mandated capital required to keep them afloat.
Their celebrations were cut short by the court injunctions that suspended the recapitalisation policy pronounced by their regulator – National Insurance Commission (NAICOM).
NAICOM had in a circular issued on May 20, 2019, announced an increase in the paid-up share capital of life companies from N2 billion to N8 billion, general business from N3 billion to N10 billion composite business, from N5 billion to N18 billion and reinsurance companies from N10 billion to N20 billion.
Immediately the pronouncement was made by the regulator, insurers rised to the occasion by sourcing funds through private placements; disposal of valuable assets; sales of stakes to investors; amongst other initiatives.
While they were mid-way in their fund raising drives, some dis-satisfied shareholders, who were not comfortable with the recapitalisation initiative went to court and sought injunctions to halt the recapitalisation process. And their requests were granted, which forced NAICOM to suspend the exercise.
Though, the exercise was suspended, that didn’t stop the gains that have been achieved while it was on. With gains enumerated below, the exercise can’t be considered fruitless.
Installations of robust Information and Communication Technology.
The recapitalisation exercise brought about installations of robust Information and communication technology by insurance operators which they are leveraging today to drive their operations. This gain impacted insurance business greatly last year as evidenced by the huge gross premium written posted by the operators in spite the COVID-19 pandemic which disrupted their operations.
They were able to leverage the ICT platforms to undertake their operations and kept their businesses afloat.
Job Retention
Another huge gain from the exercise is job retention in the industry. Owing to inflow of fresh funds, most companies were able to retain their employees at a time most employers of labour across the globe were retrenching workers, due to COVID-19 pandemic.
From observations, insurance companies on a daily bases do publish vacancies, an indication that they are recruiting at a time most firms are cutting salaries and sending workers home. This feat is traceable to the fresh funds generated through the recapitalisation.
Increased Premium
The deployment of technology, improved services and prompt payment of claims due to robust funds at operators kitties, have translated into increased premium which was record last year in spite COVID-19 and other economic maladies.
Emergence of new firms
Initiation of recapitalisation exercise paved way for the establishments of three new underwriting firms namely, Heirs General Insurance Limited, Heirs Life, Enterprise Life and a reinsurance firm, FBS Reinsurance Limited. This is considered a great milestone by observers. Their coming in to join other operators had helped enlarged the frontier of the industry in terms of job creation, provision of more products and innovations.
Prudent Management
Another great gain brought by the recapitalisation exercise is proper handling of funds. While the operators were in search of funds, they ensured all loosed ends were thoroughly locked. This is evidenced in the published 2020 financial results of most firms, where there was a sharp reduction in their management expenses.
The incoming of new investors also helped reduced financial leakages, which in the past had stalled growth in most firms.
As the insurance industry continues to anticipate the rulings of the courts, observers are of the opinion that the gains already recorded in spite the suspension of the exercise, should be consolidated.
To them, the exercise yielded immense benefits irrespective of challenges that clogged it.
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