Making Recapitalization Irrelevant and Opportunities Elusive

By Ekerete Olawoye

Gam-Ikon, MNIM, CPP

The long wait for the first recapitalization deadline of December 31, 2020 became an anti-climax as the date arrived and went by without much ado, not because of the advice given by the leadership of the House of Representatives to the regulator, National Insurance Commission (NAICOM), to postpone the deadline by six months, but by the pronouncement of a court, which hearing has been adjourned till January 12, thus putting the recapitalization process on hold.

NAICOM confirmed this in a press release that did not say much to the local and foreign investors in the Nigerian insurance industry whose intention of implementing their strategies have been repeatedly postponed, and now need to be reviewed again.

The regulator might not have won but the real losers are those that had invested enormous time into the process, some at the risk of their lives during the lockdown, seeking to fulfill the requirements and meet the deadline; unlike those who were very certain that the court would not allow the process to meet with the set deadline.

Some investors have indeed been left wondering if they have not actually been fooled by the well-known “Nigerian factor” which abhors a vacuum.

Could NAICOM have instituted a case in court against a possible attempt to delay or stop the process with another shift, now technically, of the recapitalization deadline? Or could another set of Shareholders have gone to court to request for the deadline not to be further shifted recognizing that they had already incurred costs in several ways? Or could “Concerned Policyholders have taken such legal steps to express their interests in the matter?

So, why were all other parties watching while the court case against the recapitalization process by the unhappy Shareholders progressed until this point when it has now made it look like an “irrelevant adventure” despite the consensus reached by the operators since 2019 that the insurance industry in Nigeria needed the recapitalization to leap forward?

The recapitalization process seemingly suffered some setback and then shift towards irrelevance when the leadership of the Nigeria Insurers Association (NIA) argued, during its submission at the Public Hearing in the House of Representatives, that what was needed in Nigeria was risk-based capital and not what is being pushed beyond Second Reading. Will the Legislature ignore or disregard this?

While I do not think it is necessary for either the capital base as announced by NAICOM or risk-based capital proposed by NIA, to be specifically stated in the Insurance Bill, I would suggest that in the interest of all parties, the current recapitalization process be cancelled by the regulator.

Such action, which has been taken in the past by NAICOM, will not only save all stakeholders the pain of going in the “wrong direction” but the priceless opportunity to face its market development agenda with gusto and determination.

The insurance industry in Nigeria already lost many points of opportunities in 2020 because of the intense focus on recapitalization; for example, after the Presidential Commendation the insurance industry received in April for its robust support of the COVID-19 efforts of the Federal Government with an N11b Group Life Insurance cover for designated health professionals in the event of death and donations to the NCDC, the excitements and expectations dimmed and remained so for several months.

Even the changes in the leaderships of virtually all the insurance institutions could not generate actions towards the opportunities, as investors and policyholders were fed speeches about the planned recapitalization. By September, NAICOM heightened the tempo around recapitalization when it released the schedule of activities that operators were required to follow to be qualified as successful or otherwise.

Nigerians had envisaged that insurance companies will maintain or increase the momentum with which they had begun to enrich their relationships during and after the COVID-19 lockdown. Recall that a few insurers gave discounts, offered incentives and responded positively to the plea of their policyholders.

So, what happened thereafter? Return to the old battle with recapitalization? May be

It would be most delightful to see insurers, in 2021, especially the newly licensed ones, engage existing and new policyholders in the way that gives hope to Nigerians and all those resident here.

Will we see Usage-Based Insurance where we will pay for insurance as we use our vehicles?

Will we see the use of drones for assessment of claims and payments made with less rancor with policyholders?

Will we hear about COVID-19 related insurance covers again?

Clearly, there are more opportunities to invest in the insurance industry in Nigeria, but they are based on technology (Insurtech) and digitization. It is the way to go whether the insurer is looking at Agricinsurance, Microinsurance or Takaful.

The time is NOW!