Operators at the nation’s capital market have proposed mergers of insurance companies as a good development and a way forward for the industry, as it would impact positively on the sector’s earnings.
Recently, the General Manager in charge of insurance in the Nigerian National Petroleum Corporation (NNPC) Mr. Odunayo Bammeke, at the 2009 Insurance Stakeholders’ parliament organised by Risk Analyst Insurance Brokers, tasked the insurance industry to think of further recapitalisation.
Also, the National Insurance Commission (NAICOM), in its recent guideline, requested companies wishing to participate in the oil and gas business to increase their capital base to N7 billion for lead under writers and N6 bill for co-insurers.
The Managing Director of Laksworth Investment & Securities Limited, Mr. Kayode Awotile, said that insurance industry should consider the option of merger or acquisition, with companies coming together with assets, experience and management skills as that would boost the industry’s earnings.
He added that it would enhance the profitability of the insurance companies, thereby increasing shareholders value. Awotile pointed out that during the last recapitalisation exercise of the insurance sector the funds were not actually raised in liquid asset as this can be seen in the players’ performances. He urged insurance companies to embark on merger and acquisition, which is voluntary.
The Managing Director of Dakal Services Limited, Mr. Gerald Ibe, said that insurers’ exposure to the capital market, which had affected their capital base and bottom line, makes it logical that the insurance companies recapitalise or better still consider mergers. He added that this option should not be dictated by policy or regulation.
Ibe, however, urged the managers of insurance companies to engage in research and development in order to come out with desirable products that would interest their clients, like their peers do in other countries.
A Stockbroker also noted that recapitalisation of insurance would strengthen their financial muscle. He said that NAICOM must wake up to its responsibility by ensuring effective monitoring and regulation of the sector to provide confidence to the consumers.