Key points
- A financial expert says recapitalisation alone will not guarantee growth or profitability for insurance companies.
- Insurers are advised to strengthen governance, risk management, innovation and operational efficiency alongside higher capital.
- Recapitalised firms should invest in digital transformation, product innovation, distribution and claims management.
- The expert says stronger capital will improve insurers’ capacity to underwrite large risks and reduce reliance on foreign reinsurers.
- Nigeria’s insurance recapitalisation deadline is July 31.
Main story
A financial expert, Dr Benneth Eze, says Nigeria’s ongoing insurance recapitalisation exercise will only deliver lasting benefits if insurers complement stronger capital positions with sound corporate governance, innovation and efficient operations.
Eze, the Head of Research and Development at the Chartered Institute of Stockbrokers (CIS), said this in an interview while assessing the implications of the industry’s recapitalisation programme.
He described recapitalisation as an important step toward strengthening insurers’ financial positions but cautioned that larger capital bases alone would not automatically improve performance or profitability.
According to him, the long-term success of insurance companies will depend on how effectively they deploy fresh capital, strengthen governance structures, manage risks and embrace innovation.
“While recapitalisation strengthens balance sheets, capital alone does not guarantee superior performance,” Eze said.
He noted that insurers with strong corporate governance, skilled underwriting teams, disciplined investment processes and robust risk management frameworks would be better positioned to generate sustainable returns.
Eze advised recapitalised insurers to channel additional capital into product innovation, digital transformation, expanded distribution networks, improved claims management and customer acquisition.
He also recommended strengthening reinsurance arrangements, improving investment capabilities and pursuing strategic partnerships to enhance long-term competitiveness.
According to him, regulators and investors should monitor key performance indicators such as underwriting profitability, return on equity, claims ratios, expense ratios, solvency margins and investment performance to assess the success of the exercise.
Eze expressed optimism that recapitalisation would improve insurers’ ability to underwrite larger risks in sectors including energy, infrastructure, aviation and marine, while reducing dependence on foreign reinsurers.
However, he warned that inflation, exchange rate volatility, weak investment returns, rising claims costs, economic uncertainty and governance failures could still undermine industry performance after recapitalisation.
He urged insurance companies to adopt prudent asset-liability management, diversify investment portfolios, strengthen underwriting discipline and leverage technology to improve operational efficiency.
The recapitalisation deadline for insurance companies is July 31. Under the exercise, life insurers are required to increase minimum paid-up capital from N2 billion to N10 billion, non-life insurers from N3 billion to N15 billion, composite insurers from N5 billion to N25 billion, and reinsurers from N10 billion to N35 billion.
The issues
Nigeria’s insurance industry has long struggled with low penetration, limited underwriting capacity and weak public confidence. While recapitalisation is expected to strengthen the sector’s financial resilience, analysts say sustainable growth will depend on stronger governance, improved service delivery, digital innovation and prudent risk management rather than capital increases alone.
What’s being said
“While recapitalisation strengthens balance sheets, capital alone does not guarantee superior performance.” — Dr Benneth Eze
“Strategic partnerships, technology adoption and greater operational efficiency will enable insurers to convert increased capital into sustainable earnings and long-term shareholder value.” — Dr Benneth Eze
What’s next
With the July 31 recapitalisation deadline approaching, attention will shift to how insurers raise and deploy fresh capital. Regulators and investors are also expected to monitor whether stronger balance sheets translate into better underwriting performance, improved profitability and greater capacity to insure large-scale risks.
Bottom line
Recapitalisation may strengthen insurers financially, but sustained growth will ultimately depend on how effectively companies combine stronger capital with sound governance, innovation and operational discipline.
