By David Akinmola
The insurance industry is facing renewed waves of consolidation as tougher recapitalisation requirements and a harsh economic climate leave weaker underwriting firms with limited options beyond merger or acquisition.
Available data in the industry indicate that although 58 insurers are currently licensed by the National Insurance Commission (NAICOM), fewer than half have the financial depth to independently absorb the capital increase proposed under the ongoing insurance reforms.
Tier-one insurers, some of them owned by banks, are widely seen as better positioned to raise funds through the capital market, unlike smaller operators whose balance sheets remain below regulatory benchmarks.
While some insurers may have already met the proposed capital levels and are just waiting for regulatory validation, a significant number are still scrambling to comply, amid indications that firms may be granted a transitional period of up to two years.
Under the proposed framework, minimum capital requirements would rise sharply from N2 billion to N10 billion for life insurers, N3 billion to N15 billion for non-life operators and N10 billion to N35 billion for reinsurers.
The law justified the increases on the back of currency depreciation, inflation, the Finance Act 2022, emerging risks such as cyber and credit insurance and the need to improve Nigeria’s competitiveness under the African Continental Free Trade Area (AfCFTA).
Speaking on the broader implications, the Executive Secretary of the Nigerian Council of Registered Insurance Brokers (NCRIB), Tope Daramola, said the insurance industry cannot be insulated from the wider economy but expressed optimism that ongoing reforms could improve disposable incomes and boost insurance uptake.
“The industry reflects what happens in the overall economy. As reforms begin to yield results, more Nigerians will have the capability to prioritise insurance protection,” he said.
Several operators, who spoke anonymously over the week, described the new recapitalisation framework as significantly stricter than the tier-based model previously suspended by regulators. One executive said firms that fail to comply face stark choices.
“It is better merge or be acquired and retain a seat at the table than to be liquidated. The recapitalisation is different for any company that fails after the timeline, risks going under,” the source said.
Others cautioned that mergers themselves carry risks, particularly where liabilities are not fully disclosed during negotiations.
Meanwhile, shareholder groups are closely monitoring the reforms. Chairman of the Independent Shareholders Association, Sunny Nwosu, said the association would continue to review the legal implications of the new law.
Not all major insurers are considering acquisitions. Chairman of Mutual Benefits Assurance Plc, Dr Akin Ogunbiyi, said the company has no plans to acquire another insurer, noting instead it is pursuing strategic investments outside the sector.
He assured shareholders that the firm is well-positioned to meet any recapitalisation requirement set by NAICOM.
