Sunday Thomas as defining moment of insurance industry’s recapitalization project

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The insurance industry in Nigeria which is one of the oldest professions in the country may have undergone many developmental faces but there is every reason for one to belief that the outcome of the issues of the last one year could stand out as the industry’s defining moment.

Though not the first time but there are enough reasons to conclude that  the ongoing recapitalisation exercise in the  insurance industry is one that will change the face of risks management and underwriting practice in Africa’s most populous nation.

Besides, the outcome of the recapitalization exercise will shape the tenure of Mr Sunday Olorundare Thomas as the nation’s sixth Commissioner for Insurance.

The insurance industry have in the last one year or so deliberately involved itself in such programmes and projects which will culminate in the deepening of the market and by extension, the fortunes of the operators.

These include the Market Development and Restructuring Initiative (MDRI), enforcement of the compulsory insurances, expansion of the window on local content as per special risk insurance, Marine insurance clauses among others. But financial experts are of the view that it will take the successful completion of the industry’s recapitalisatrion exercise, a project which is intended to help increase the appetite of companies to carry and indeed retain risks in their portfolio for the market to be able to drink from the fountains of the various business expansion mechanisms.

Although the current recapitalization exercise of the insurance subsector predates the appointment of Mr Thomas as Commissioner for Insurance since the exercise was flagged off in May 2019, Mr Thomas appear to have provided both the legal framework and the harmonious environment for the actualization of the goals of the project, an exercise which is expected to bring in an estimated N180 billion into the industry. Industry analysts are in agreement that the recapitazlisastion venture when completed will increase the sector’s capacity to underwrite big ticket risks, contribute reasonably to the economy and also able to offer good returns to investors. They are also of the view  that the sector post consolidation will have enough resources to attract quality manpower, acquire necessary skills and technology, increase retention in the local market, and be able to take advantage of untapped potentials to create shareholder value.

Above all, the sector’s recapitalisation is expected to drive market development for expansion and increased penetration to the nook and crannies of the country, where insurance will no longer be seen as an elitist product, but one that will be a major financial planning and wealth creation tool for majority of the citizens.

Experts describe market development as a growth strategy that identifies and develops new market segments for current products.

It is also a market development strategy that targets non-buying customers in currently targeted segments, as well as targets new customers in new segments.

The import of this definition is that the industry players both the regulator and the operators will have a big role to play post consolidation in growing this market, deepening penetration, maximizing the injected capital by developing old and nurturing new markets.

The sector has a lot of potentials given the huge population of over 200 million people, and dastardly low penetration level of less than one percent, which has been described by analysts as the attraction of many foreign insurers who have been coming in their numbers to take position in the market since the last six year now.

The industry at its current capital is only able to take about 30 percent of the risk emanating from the oil and gas sector, according to statistics from the industry trade groups.

This development, according NAICOM has been due to lack of capacity, particularly funding which is why a lot of the risks emanating from the local market are largely ceded abroad through reinsurance.

This recapitalisation therefore is expected to create supply side capacity for local content utilization, given the provisions of the Act.

“Section 49 of the Nigerian Oil and Gas Industry Content Development Act, 2010 in Nigeria requires all investors in the oil and gas industry to insure all their insurable risks relating to the oil and gas business, operations or contracts with an insurance company, through an insurance broker registered in Nigeria under the provisions of the Insurance Act as amended.”

While Section 50 of the same Act requires that where an operator desires to place insurance risk outside Nigeria, it can only be done with the written consent of the insurance sector regulator, the National Insurance Commission (NAICOM), which shall ensure that Nigerian local capacity has been fully exhausted.

Importantly, and most demanding at the moment according to NAICOM is the growing size of annuity business following increasing growth in pension funds assets standing at about N10 trillion today, to which large chunk of it is expected will empty itself in the insurance business.

Given this challenge therefore, the ongoing recapitalization of the industry which also forms part of NAICOM’s second phase of its Market Development and Restructuring Initiative (MDRI) holds the big future of the business.

MDRI according to NAICOM will be re-unveiled soon and will come with mark out clear targets and tasks for all stakeholders in the industry, with commitment to vigorously pursue the continued implementation of the different Compulsory Insurances.

NAICOM had on 20th May 2019 increased the minimum paid-up share capital of Life Insurance companies from N2 billion to N8 billion; Non-Life (General) insurance from N3 billion to N10 billion and Composite Insurance from N5 billion to N18 billion. Re-insurance companies were also directed to raise their capital base from N10 billion to N20 billion.

Underwriting firms are said to be struggling to comply with the demands of the recapitalization especially in the area of raising mon ey through the capital market.

And this is where the moderating factors of Mr Thomas came into play as he is said to have “accommodated” all the fears which hitherto characterized the market.

It was not surprising that the eight insurers who are considering business combination are about finalising discussion with the parties involved, thanks to deadline extension because more time was needed to  seal such business deals. On Going Efforts:

Olorundare Sunday Thomas appointment as the substantive Commissioner for Insurance and Chief Executive Officer of the National Insurance Commission (NAICOM) became effective April 30, 2020; having been appointed in acting capacity in Aug, 2019 following the expiration of the tenure of Mr. M U Kari, the former Commissioner for Insurance.

Prior to this appointment, Thomas was the Deputy Commissioner in charge of technical matters at the Commission between April 2017 and August 2019.

Mr. Thomas is a thorough-bred insurance professional with vast knowledge and experience in underwriting, regulation and hands-on management of human and material resources spanning over four decades uninterrupted.

During these years, Mr. Thomas had traversed the entire insurance sector in Nigeria leaving indelible marks along the way. It is instructive to note that Mr. O. S. Thomas (as widely known) as Director – General of the Nigerian Insurers Association (NIA) between May 2010 and April 2017, brought his experience to bear on the job. It is to his credit that the Association successfully developed and deployed the Nigeria Insurance Industry Database (NIID) platform.

He holds a BSc (Hons) in Actuarial Science and an MBA Finance both from the University of Lagos. He is also an Associate member of the Chartered Insurance Institute, London and Nigeria, Member Society of Fellows of the CII London, Member Nigeria Institute of Management among others.

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