‘26 Insurance Firms Likely to Meet New Capital Requirement’
Agusto and Co., a research, credit ratings and risk management firm, has envisaged a significant reduction in the total number of players in the Nigerian insurance industry by at least 50 per cent on December 31, 2020.
It stated this in its latest report on the insurance industry, in which it predicted that at least 26 out of 59 insurance firms licensed to underwrite risks in the non-life, life and composite business segments, would be able to meet the new minimum capital requirement stipulated by the National Insurance Commission (NAICOM) for operation of insurance business in Nigeria.
The report also predicted a stable outlook and anticipated 26.5 per cent growth in total assets of the industry between now and December 31.
“We expect marginal improvement in the near term and significant growth in the medium term on the back of the recapitalisation. However, the fragile macroeconomic environment remains a constraint,” the report added.
The new minimum capital requirements stipulated by NAICOM increased the capital base of four categories of insurance licenses from N3 billion to N10 billion for non-life insurance; N2 billion to N8 billion for life insurance; N5 billion to N18 billion for composite insurance and N10 billion to N20 billion for reinsurers. The deadline for meeting the new minimum requirement is December 31, 2020.
The report on the Nigerian insurance industry, which was titled “Recapitalisation: The Journey to Consolidation,” was unveiled in Lagos on Wednesday, by the Senior Analyst, Financial Institutions Ratings, Agusto and Co., Ada Ufomadu.
Ufomadu stated that 13 insurers out of 28 players in the non- life segment of the industry would comply before the December 2020 deadline through private placements, rights issuances and business combinations.
She also tipped eight life insurers to meet the new capital base before the December 2020 deadline.
Similarly, “we expect five composite insurers to comply before the December 2020 deadline,” she said.
The report stated that three out of the 28 non-life insurers and three out of 14 players in the life insurance sector had met the new minimum capital requirements. However, the report stated that only one out of 13 players in the composite insurance has met the new minimum capital requirements.