·Strict regulatory environment expected
·Recapitalisation, M&As underway
·Highly capitalized coys to crowd out others
By Rosemary Onuoha
INSURANCE operators are entering year 2019 with great optimism, hoping that the year will turn out better than 2018. Operators who spoke to Insurance Vanguard expressed optimism that the federal government’s plan to embark on developmental projects in 2019 will boost activities in the insurance sector.
Speaking on this, Managing Director of Prorisk Insurance Brokers, Mr. Oluwagbemiga Olawoyin, said, “We believe that the performance of the sector will be better considering government’s various plans for developmental projects. So we are looking at 2019 with great optimism.”
Although operators were optimistic that year 2019 will see improved business activities, they highlighted some issues that will likely shape the industry in 2019.
Strict regulatory oversight
This year, strict regulatory oversight by the industry regulator, National Insurance Commission, NAICOM, is expected to take the centre stage as indications emerge that the regulator will not be lenient with defaults by operators. The tough stance by NAICOM is compelled by the cancellation of two unique policies after agitations from both the insurers and brokers.
After the Tier Based Minimum Solvency Capital, TBMSC, and the State Insurance Producers, SIP, policies were aggressively opposed and rejected by operators, NAICOM affirmed that it will consider other appropriate tools to address the issue of low capital in the insurance industry.
Market Advantages: According to NAICOM, there is need for underwriters to be adequately capitalized. NAICOM stated: “The fact remains that the operators need to be capitalized beyond their present level. But the commission will look at its bag and use the appropriate tools to address this issue. With the little power that we have in NAICOM now, we will use it to the advantage of the market.”
Recapitalisation, Mergers and Acquisitions
The anticipation of strict and intense supervision from the regulator will compel more capital raising by insurers and it is expected that the sector could experience some mergers and acquisitions after so many years. Also, the sector is expected to witness more foreign investments in the course of the year.
Speaking on this, Olawoyin said: “The TBMSC was a major pronouncement which brought some kind of highlight to the industry. We know that it has been cancelled, but various operators are already making efforts to shore up their capital in one way or the other. That has put some highlights into the capital base of underwriters. So going forward, we are going to be seeing one form of capital raising or the other.”
Also speaking on this, Managing Director of Consolidated Hallmark Insurance Plc, Mr. Eddie Efekoha, said that the cancelled TBMSC policy opened the eyes of operators.
He stated: “Despite the cancellation of the TBMSC, it has opened the eyes of operators. Some of us are already taking advantage of that. Thanks to NAICOM because at times, we all sleep and ignore what we should do and focus on less important things. But the TBMSC brought about a reawakening on some of us who were sleeping.”
Dominance by highly capitalized insurers: In the course of the year, many insurance customers will shift their businesses to insurers that are capitalized beyond the statutorily stipulated levels. This, according to stakeholders, is the fallout of the cancelled TBMSC policy.
Also speaking on this Efekoha said, “Many of our clients are beginning to scrutinize our books and are shifting towards companies with higher capital. A broker told me that a client has already seen that N9 billion is what is required to underwrite oil and gas under the TBMSC policy and he said, ‘so please go and shore up to N9 billion’. It is immaterial whether NAICOM has withdrawn the circular.”
Also speaking, President of the Nigerian Council of Registered Insurance Brokers, NCRIB, Mr. Shola Tinubu, said, “Clients are mounting a lot of pressure on brokers and dictating where to place their business. All insurance companies should begin to address the issue as quickly as possible. Any insurance company worth its salt should immediately begin to address the issue. It is in the interest of the companies to address it as soon as possible. Where would customers want to buy a third party policy from? They will want to buy it from where they will get the best security.”
Economy performance to influence sector
A major determinant of insurance growth in 2019 is a thriving economy. Operators believe that with a thriving economy, the people will thrive which will consequently influence insurance sector growth. Olawoyin, who said that insurance is a real measure of human development said, “Insurance follows the fortune of the people and is a very good indicator of human development. If there is no development of the people, insurance is going to suffer because it captures every side of them. “
If people are well remunerated, if jobs are created, people will buy cars, people will rent houses, and people who have money will build houses that people will rent. “When you buy a vehicle, you will insure it, when you get a job, there is one form of insurance or the other that your employer will put in place. And when you get money, you will rent a house; householder insurance will be there or fire insurance and so on. So insurance will be a barometer to measure the temperature of human capital development in Nigeria in 2019. It tells a story.”