The National Insurance Commission (NAICOM) expects improved investor sentiment and stronger performance from Nigeria’s insurance stocks as uncertainty surrounding the industry’s recapitalisation exercise eases following the clearance of 43 insurance and reinsurance companies.
Olusegun Omosehin, commissioner for insurance and chief executive officer of NAICOM, said the completion of the capital-raising exercise had provided greater clarity on the fundamentals of the insurance industry, which could eventually translate into improved market valuations.
Omosehin spoke in a televised interview while responding to questions on the relatively muted performance of insurance stocks during the recapitalisation exercise compared with the stronger market reaction that followed the banking sector’s capital-raising exercise.
According to him, investors had largely remained cautious as the market awaited clarity on which insurance companies would successfully meet the new minimum capital requirements.
“The market was waiting for clarity. The operators have risen up to that occasion, capital has been raised. As of today, we have 43 that have been cleared and many more will follow,” he said.
NAICOM had announced that 43 insurance and reinsurance companies had met the new minimum capital requirements under the recapitalisation exercise, while companies that submitted evidence of compliance close to the deadline remained subject to final verification.
Omosehin said the emergence of compliant operators had strengthened the visibility of the sector’s fundamentals, although he acknowledged that the market might require some time to fully reflect the changes.
“The fundamentals are better now and they are clearer. Of course, it might take a few moments for the market to fully align and respond to some of this,” he said.
The commissioner expressed optimism that the stronger capital base of compliant insurers would make the industry more attractive to investors.
“We just appeal to investors, better times are here. This is the time you begin to see considerable return on your investment,” Omosehin said.
However, he said the completion of the capitalisation exercise was not an end in itself, with NAICOM now expecting operators to demonstrate tangible benefits from their stronger balance sheets.
According to him, one of the major outcomes expected from the new capital regime is increased capacity for insurers to mobilise domestic savings and participate more actively in long-term financing, including infrastructure development.
“We would like to see a situation where the enablement of infrastructure financing, for instance, through domestic mobilisation of savings by insurers, comes to the table,” he said.
Omosehin said better-capitalised insurers with larger balance sheets should be able to invest in long-term bonds and other instruments that can support infrastructure financing and contribute to economic development.
Beyond investment capacity, he said NAICOM would also be looking for faster claims settlement and improved liquidity across the sector, arguing that policyholders should begin to experience tangible benefits from the stronger financial position of insurers.
“We want to see an insurance sector that is able to respond a lot faster to issues of claims payment. We want faster claims settlement,” he said.
The commission also expects the recapitalisation to trigger greater product innovation, with insurers developing new offerings capable of addressing the changing needs of households and businesses.
Omosehin said insurers that had raised adequate capital should also increase investments in technology, particularly digital distribution and other channels that can expand access to insurance.
“We also like to see a situation where operators that have raised adequate capital can also begin to invest a lot more in technology, which would enhance their distribution,” he said.
He added that the larger balance sheets created through the recapitalisation should strengthen insurers’ capacity to provide risk protection for businesses and households and contribute to the resilience of the wider economy.
“For a long time, we have been stunted due to lack of adequate capital on the part of operators. So we would like to see a situation where now that we have well-capitalised operators with bigger balance sheets, they can then begin to derisk investments for businesses, for households and even generally be able to give that resilience that the economy desires,” Omosehin said.
On the regulatory side, the NAICOM commissioner said the commission would intensify enforcement of higher standards following the recapitalisation.
He identified corporate governance, risk management and market conduct as key areas that would receive greater regulatory attention, stressing that insurers would be expected to treat customers fairly and provide greater value for money.
“We want to see higher levels of corporate governance in operations, higher levels of risk management and we want to see improved market conduct on behalf of operators,” he said.
Omosehin also pointed to the Insurance Policyholders Protection Fund as part of measures being implemented to strengthen consumer confidence and provide protection to policyholders in the event of an insurer’s insolvency.
He said the framework was intended to provide an additional layer of protection for policyholders and strengthen confidence in the insurance industry.
The commissioner said the recapitalisation exercise had laid the foundation for rebuilding public trust in insurance, but acknowledged that confidence would take time to develop.
He urged Nigerians to take advantage of the stronger capital position of insurers by seeking greater protection from the industry, while calling on operators and regulators to intensify consumer awareness.
Omosehin also advocated simpler insurance products and policy documents, saying the use of plain language and reduced technicalities in policy wordings would help improve understanding and trust among consumers.
The relatively subdued movement in insurance equities during the recapitalisation exercise has contrasted with the heightened activity witnessed in the banking sector during its own capital-raising exercise.
With the recapitalisation uncertainty now easing, NAICOM’s focus is shifting towards whether the additional capital can translate into stronger investment capacity, faster claims payments, product innovation, wider digital distribution and better consumer protection, outcomes that could ultimately determine how investors and policyholders respond to the industry.
