Key points
- Shareholders want insurers to use their stronger capital base to expand coverage and increase insurance penetration.
- They are demanding better dividends and stronger investor protection following the recapitalisation exercise.
- Shareholders also want NAICOM to intensify supervision and enforce stronger corporate governance across the industry.
Main story
Shareholders have urged insurance companies to convert the gains from the sector’s recapitalisation into increased business, wider market coverage and better returns for investors.
The call followed the completion of the recapitalisation exercise, which saw 50 insurance and reinsurance companies meet the new minimum capital requirements.
The requirements are N10 billion for life insurers, N15 billion for non-life insurers, N25 billion for composite insurers and N35 billion for reinsurers.
Mr Moses Igbrude, National Coordinator of the Independent Shareholders Association of Nigeria (ISAN), said the stronger capital position should enable insurers to expand their underwriting capacity and reach more Nigerians.
He said the industry’s penetration, currently estimated at one per cent, should increase substantially over the next few years as insurers use the additional capital to develop products and expand their operations.
Igbrude also said shareholders should begin to see better returns from their investments as increased business generates higher revenue and profitability.
He said insurers could no longer rely on weak returns after shareholders had provided additional capital to strengthen their businesses.
Igbrude further called for increased regulatory oversight, arguing that larger capital bases and expanded business operations required stronger supervision.
He said the National Insurance Commission (NAICOM) should ensure that insurers maintain proper corporate governance and comply with industry standards.
He also urged insurance companies, employees and other stakeholders to work together to strengthen the industry and increase its contribution to the economy.
Mr Boniface Okezie, Chairman of the Progressive Shareholders Association of Nigeria (PSAN), similarly called for stronger protection of investors.
Okezie said the insurance industry needed to restore shareholder confidence, particularly among investors who had experienced poor dividend payments or had funds trapped in companies that ceased operations.
He said previous recapitalisation exercises had left some shareholders without meaningful returns on their investments.
According to him, the latest exercise should therefore produce more than stronger balance sheets for insurance companies.
It should also result in improved business performance, higher dividends, stronger share prices and greater confidence in insurance stocks.
The issues
The recapitalisation has strengthened the capital base of companies that met the new requirements, but shareholders are now looking for evidence that the additional capital will translate into better performance.
Insurance penetration remains a major concern. With shareholders putting the current penetration rate at about one per cent, insurers face pressure to expand beyond the existing market and develop products that attract more customers.
Investor returns are another issue. Shareholders argue that stronger capitalisation should eventually produce higher profitability and more meaningful dividends.
The exercise has also increased expectations around corporate governance and regulatory oversight. As insurers handle larger amounts of capital and potentially expand their operations, shareholders want stronger safeguards against poor management and practices that could undermine investor confidence.
What’s Being Said
“In terms of operation, let us see insurance penetration in the country increase from the current level of one per cent.” — Moses Igbrude, National Coordinator, Independent Shareholders Association of Nigeria
“It should never be the same again. We need an era where shareholders receive meaningful dividends. The era of kobo-kobo dividends should go.” — Moses Igbrude, National Coordinator, Independent Shareholders Association of Nigeria
“NAICOM needs to do more work. More money and more volume of business mean that there should be more supervision.” — Moses Igbrude, National Coordinator, Independent Shareholders Association of Nigeria
“Corporate governance must be enhanced. We must integrate everybody and ensure that the business is run according to the ethics of the industry.” — Moses Igbrude, National Coordinator, Independent Shareholders Association of Nigeria
What’s next
Insurance companies will be expected to deploy their stronger capital positions towards expanding underwriting capacity, increasing market penetration and improving profitability.
Shareholders will also be watching dividend payments, share-price performance and other indicators of improved investor returns.
NAICOM is expected to continue supervising the recapitalised industry, with shareholders calling for stronger oversight and corporate governance.
Bottom line
The insurance recapitalisation has raised the financial capacity of companies that met the new capital requirements, but shareholders now want measurable results.
For investors, the key tests will be whether stronger capital produces wider insurance coverage, higher profits and meaningful dividends, while stronger regulation and governance protect the gains of the exercise.
