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|13 Insurers Qualify To Operate In Naicom’s Tier 1 Category by chidima2019: 1:20am On Aug 10, 2018|
Thirteen insurance companies are qualified to operate in the Tier 1 category as their capital bases exceed the regulatory limits set by the National Insurance Commission of Nigeria (NAICOM).
Experts are of the view that the introduction of the new rules will enable firms take on more risk and reposition them to compete at the global competitive arena. It will be recalled that the commission recently introduced a 3-tier based recapitalisation for the insurance industry.
That means composite insurance companies that are now interested to play in the Tier 1 category are expected to increase their capitalisation from N5 billion to N15 billion, while those interested in the same tier but operating life business are required to recapitalize from N2 billion to N6 billion. Non-life insurers planning to play in this tier are expected to improve capitalisation from N3 billion to N9 billion.
According to an August 8 report released by investment house Chapel Hill Denham, titled “Risk-based Capital: Mergers and Acquisition inevitable” thirteen insurance companies qualify to operate in all the Composite, Life, and Non-Life Insurance business under the Tier 1 category. The investment firm used the latest financial statement of firms- half year 2018- to extract their shareholders’ fund.
According to the report, Leadyway Assurance Company Limited, with a shareholders’ fund of N55.30 billion and solvency margin of 369 percent and AXA Mansard Insurance Plc with shareholders’ fund of N17.51 billion and solvency margin of 117 percent, can operate in the Tier I composite insurance segment.
Firms that qualify to operate in the Tier 1 non-life insurance business are Zenith Insurance Limited with shareholders’ fund of N23.47 billion and solvency margin of 261 percent, Leadway Assurance with shareholders’ fund of N22.58 billion solvency ratio (251); Linkage Assurance Plc with shareholders fund of N20.44 billion, solvency margin (227 percent); Custodian and Allied Plc with shareholders’ fund of N17.46 billion, solvency margin (194 pecent); Wapic Insurance Plc with shareholders’ fund of N15.24 billion, solvency margin (169 percent).
Others that can participate in the segment are: Nicon Insurance Limited with a shareholders’ fund of N14.59 billion, solvency margin (162 percent), AXA Mansard with shareholders’ fund of N14.20 billion solvency ratio (158 percent), Veritas Kapital Assurance Plc with shareholders’ fund of N10.90 billion, solvency margin (121 percent); NEM Insurance Plc with shareholders’ fund of N10.73 billion, solvency margin 119 (percent); and Universal Insurance Plc with shareholders’ fund of N10.41 billion and solvency margin of (116 percent).
Three firms qualify to operate in the Tier 1 Life Insurance business: Leadway with shareholders’ fund of N24.47 billion and solvency margin of 408 percent; FBN Insurance Limited with shareholders’ fund of N10.57 billion, solvency margin of (176 percent); Aiico Life Insurance Plc with shareholders’ fund of N7.34 billion, solvency margin (122 percent), and Mutual Benefit Life Assurance Limited with shareholders’ fund of N7.01 billion and solvency margin (117 percent).
Leadway Assurance, the largest insurer by premium, asset, and total equity qualifies to operate in Composite, Non-Life, and Life Insurance business.
Analysts at Chapel Hill Denham are of the view that the new solvency capital base is positive and they expect it to enhance specialization.
The new solvency requirement has elements of intervention levels and actions by NAICOM, according to the report.
“There are four broad indicators for capital top up requirements for insurers. Going forward, insurers with solvency less than or equal to 130 percent will be regarded by NAICO M as well run on all financial and non financial indicators within acceptable range,” said analysts at Chapel hill in the report.
Insurers that have their solvency margin below 130 percent but greater than or equal to 120 will be required to come up with business strategy to sustain the solvency level, five years cash flow projection and other plans drive by management and NAICOM.
“Insurers with solvency below 120 percent, but greater than 100 percent will be regarded as having acceptable status, but with deteriorating indicators and will be required to inject additional capital to enhance capital base,” the analysts summed.
That means firms like NEM Insurance and Universal Assurance will have to shore up their capital if they are to sustain the Tier 1 status.
Mohammed Kari, commissioner for insurance NAICOM said that the recapitalization is desirable as interest rates and inflation rates have gone up while insurers have been on the same capital base for 10 years.
Analysts are of the view that the latest rules could spur mergers and acquisition in the industry as the country continues to lag South Africa and Kenya in terms of insurance penetration and contribution to the economy.
For instance, Insurance industry premium income of N370 billion is less than one percent of nominal GDP size of 114.90 trillion while industry penetration is 0.32 percent for a population of 200 million.
|Re: 13 Insurers Qualify To Operate In Naicom’s Tier 1 Category by Tunagee(m): 5:46am On Aug 10, 2018|
These insurance companies are simply enjoying free monies and funds, cos how many of these risks do happen? and if they do, how many claims are being fulfilled to the policy holders in case of loss of properties, lives and other risks that occurred?
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