Top industry sources who spoke on condition of anonymity said the recapitalisation cost was drawn from fees to be paid to the Nigerian Securities and Exchange Commission (SEC), tax and stamp duties to be paid to the Federal Inland Revenue Service (FRSC), among other fees.
The Nation further gathered that the Accounting Committee of the Nigeria Insurers Association (NIA) did the costing of individual insurance companies recapitalisation expenses with the total amount put at N77 billion for the 58 existing companies.
The ultimatum, raised the minimum paid-up share capital of a Life insurance company from N2 billion to N8 billion; Non-Life insurance from N3 billion to N10 billion and Composite insurance from N5 billion to N18 billion. Re-insurance companies were directed to raise their capital base from N10 billion to N20 billion.
The newspaper further gathered that companies offering composite business that requires N18 billion minimum capital are the worst hit, as some could have to cough out about N5 billion to raise the N18 billion.
The companies are Leadway Assurance, AIICO Insurance Plc, Allianz Nigeria Insurance Plc; AXA Mansard Insurance Plc; Cornerstone Insurance Plc; Gold Link Insurance Plc; Great Nigeria Insurance Plc; Industrial & General Insurance Company Plc; Lasaco Assurance Plc; Leadway Assurance Company Limited; NICON Insurance Plc; Niger Insurance Plc; NSIA Insurance Limited; and Standard Alliance Insurance Plc
Presently, the insurers are groaning, lamenting why they would have to spend N5 billion, that the business generated for itself and pay fees.
A source said: “The accounting committee of the NIA did the costing which has been sent to NAICOM to see. How can you take N5 billion, that the business generated for itself and pay fees?
“The impact of recapitalisation is huge and it is difficult for us to bare. This has led many current and potential investors to rethink insurance business which they said is not yielding dividends for them.
Another source said: “A breakdown of the N77 billion recapitalisation cost shows that 58 insurers will have to pay these fees, including those who are not looking at going to the capital market to raise funds.
“We are calling on NAICOM to have a rethink about the recapitalisation exercise before it will kill the industry.”
Meanwhile, the Acting Commissioner for Insurance, Mr. Sunday Thomas said the Commission is engaging with other relevant regulatory bodies and agencies of government in the financial services sector for palliatives that will reduce the cost of recapitalisation on insurance companies.
Thomas, who spoke with reporters, said the response from the relevant regulatory bodies and agencies, including the NSE, was good.
He said the exercise was going on smoothly and that the Commission would do all that is necessary to make it a success.
He stressed that with a contribution by the industry to the nation’s Gross Domestic Product (GDP) at less than one per cent, it has underperformed its potential, especially when compared with other sectors in the financial services industry.
He said: “In the last few years, the insurance industry has witnessed series of changes owing to reforms embarked upon by NAICOM. These reforms include financial reporting, No Premium, No Cover, Corporate Governance Code, Risk Based Supervision, Information Communication Technology advancement, Financial Inclusion, Claims Settlement, Market Conduct, Expansion of Distribution Channels, Recapitalisation with all aimed at building confidence, trust and enhancing our market value and profitability.
“The Commission shall continue to introduce new reforms and initiatives in line with international best practices in our march towards achieving the full potential of the industry. I believe that once we can successfully navigate this corner, we could be on our way to entrenching a financially solid, vibrant, viable and active insurance market that would bring about not only an increase in penetration but a substantial increase in the industry’s contribution to GDP,” he said.