Worried by the weak financial base and the inability of most insurance firms operating in Nigeria to fulfill their obligations to customers, the regulatory National Insurance Commission (NAICOM) is taking steps to encourage more mergers among operators.
The private Guardian newspapers reported Monday that NAICOM believed that with more insurance companies coming together, the deficiencies relating to their solvency margin would be addressed.
“The industry has continued to suffer from inadequate capital and limited human capital. The challenge relating to inadequate capital may continue for some time, as the industry is not known for self-induced capitalisation.
“But if practitioners are sincere in their approach to the game and we have, for instance, about 20 strong underwriting companies in the industry, it will be very good for the market,” NAICOM Commissioner for Insurance Fola Daniel said.
Already, two firms, Custodian and Allied Insurance Plc and Crusader Insurance Plc, have taken the lead to merge their operations.
A recent survey by the insurance regulator showed that about 10 underwriting firms are very weak and operating below the minimum paid-up capital of 3 billion naira (US$19m) for general insurance business and two billion naira (US$12.7m) for life offices.
Following the 2005 reforms, the industry minimum capital base increased from 150 million naira (US$955,000) to 2 billion naira (US$12.7m) for life business offices, and from 200 million naira (US$1.2 million) to 3 billion naira (US$19m) for general insurance business.
The minimum paid-up capital for reinsurance business was increased from 350 million naira (US$2.2m) to 10 billion naira (US$63.6m).