Industry in panic mode as NAICOM takes ‘unilateral decision’ on TBMSC

The sudden change in the transition timetable of the Tier-Based Minimum Solvency Capital (TBMSC) regime to October 1, 2018, by the National Insurance Commission (NAICOM) has unsettled insurance sector players, as they lament the lack of consultations before the decision.

NAICOM had earlier put the deadline for the implementation of this exercise at January 1, 2019, which operators vehemently disagreed with, before the drastic change that brought the plan much closer.
 
The development, which cuts off three months from the initial plan, has left the operators with only 27 days to recapitalise from now.

Ogunbiyi added that immediate implementation of the tier-based rating could lead to crisis of confidence for the entire insurance industry, where only about seven of the 29 companies would qualify under the new standards.

Worse still, he said this could lead to massive de-listing of Insurance stocks from the Nigerian stock market, stressing that insurance stocks are already classified as penny stock due to inability to support pricing by regular dividend payments. 

Besides, he believes this would lead to hostile take-overs with peanuts, especially, by foreign investors with short-term gains as focus.
 
He pointed out that it might as well be practically impossible to fully implement the provision of the Local Content law, even as the rebranding project of the insurance industry may suffer a major set- back, while the public perception of some companies and the entire industry will be affected adversely.
 
According to him, a tier-based capital requirement, whereby a Tier 1 composite insurance company would require a solvency capital of N15 billion, is the highest in African insurance market, pointing out that the solution to the challenges facing the industry is not capital increase.

He recalled that the National Pension Commission (PenCom) is yet to increase the capital base of Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs) from N2 billion and N5 billion respectively, 14 years after inception.
 
Yet, they are managing and have grown the pension assets to about N8.2 trillion, while the insurance industry, which keeps on recapitalising, is no where near this feat, suggesting that the capital base might not be the problem.

“Is it only capitalisation that can drive insurance development in Nigeria, given the experience of other African insurance markets?

What has been the contributions and performance of the industry since the 2007 recapitalisation exercise?

What level of returns has accrued to the investors and shareholders of the industry ever since? Who are the target investors expected to shore up the new capital call even if there was time?” he queried.

Ogunbiyi said today’s shrinking profit pool and the overall performance of insurance industry can only be checkmated by innovation, technical capacity, healthy competition, adoption best practices, governance structure and creating “blue oceans of untapped new markets.”

“As an industry, we need to urgently adopt a value innovation strategy to enable us provide relevant affordable products for our teeming population.

My advice is that as a priority, we must align insurance services to the unique lifestyles of our citizenry in all income groups,” he advised.

Moreover, Insurance agents are pleading with NAICOM to extend this deadline.

Speaking at a press briefing organised by the Association of Registered Insurance Agents of Nigeria (ARIAN), in Lagos, its President, Ademola Ifagbayi, said, such extension will give more time to underwriters to explore the best option to recapitalise.
 
Stating that the association fully supports NAICOM, he however, believes insurance companies need more time to understand the new recapitalisation model and make a decision on where to play in.

Similarly, insurance brokers, under the auspices of the Nigerian Council of Registered Insurance Brokers (NCRIB), said it has set up relevant committee in motion to see the extent to which the new policy thrust would affect insurance brokers in the country.

The President of NCRIB, Shola Tinubu, said: “On the part of our council, we have set relevant Committees in motion to see extent to which this new policy thrust would affect stakeholders, as consumers have begun to express concerns over the implications for them.