Ogunbiyi Write-offs NAICOM Over ‘Tier-Based Capitalisation’ saying is a Threat to Insurance Sector

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Dr. Akin Ogunbiyi, Chairman, Mutual Benefits Assurance Plc has warned that the recent Tier-Based Minimum Solvency Capital (TBMSC) policy recently introduced by the National Insurance Commission (NAICOM) poses serious risk to the growth and stability of the insurance industry in Nigeria.

Ogunbiyi, who chaired the 5th Anniversary of BusinessTODAY magazine in Lagos, wondered why a Tier-1 composite insurance company in Nigeria should require a solvency capital of N15 billion ($42million) when the average capital requirement in the African insurance market is only $10 million.

L-R: Mr. Benedict U. Ujoatuonu, Managing Director/CEO, Universal Insurance Plc; Dr Farouk Aminu, Head, Research & Strategy Management Dept, National Pension Commission; Mr. Olaotan Soyinka, Managing Director/CEO, Sovereign Trust Insurance Plc; Dr ( Mrs.) Tonia Smart, MD/ CEO Yorkcity Consult Ltd; Dr. Akin Ogunbiyi, Chairman of occasion; Nkechi Naeche, Publisher/CEO, Business Today, and Mr. Glory Etaduovie, Managing Director, IEI-Anchor Pension Managers Ltd, launching Business Today magazine during the 5th anniversary/Award held in Lagos on Tuesday.

He said the new capital policy would be counter-productive, anti-growth and disruptive. He warned that the immediate implementation of the Tier-based rating would lead to the following:

  • Crisis of confidence for the entire insurance industry where only about 7 of the 29 companies qualify under the new standard.
  • De-listing even more of Insurance stocks from the Nigerian Stock market (Insurance stocks already classified as penny stock due to inability to support pricing by regular dividend payments)
  • OsHh Hostile take-overs for peanuts especially by foreign investors with short term gains as focus
  • It might be practically impossible to fully implement the provision of the Local Content law
  • The Rebranding project of the insurance industry may suffer a major set- back as the public perception of some companies and the entire industry will be affected adversely
  • There will be significant job loss


Dr  Ogunbiyi called attention of  the sector regulator saying “Is it only capitalisation that can drive insurance development in Nigeria giving 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 (Return on Equity/Return on Investment) have 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?”

The Mutual Benefits Assurance Chairman said he also found interesting recent comments and rather overly simplistic deductions that if the top three banks in our country have capital in excess of N300 billion each, then the three top insurers with between N14 billion and N25 billion each, is a sign of under-performance by the entire industry and its failure to most assuredly complete the Nigerian financial industry loop.

Dr Ogunbiyi cited example saying “Today in Nigeria, government (at all levels) pays the biggest premium whenever it decides to insure its assets. The NNPC account, for instance automatically makes whichever company gets the business the number one in the industry. So, making it exclusive to companies in Tier-1 of NAICOM’S TBMSC will definitely promote the growth of a few practitioners. We would thereby by default create behemoths.

He pointed out that the unhealthy competition, unethical way of doing business, popularly called rate-cutting, inadequate technical knowhow, and lack of insurance penetration; are big road-blocks in the way of development and growth of the industry. So, how will a policy of exclusion solve these problems?

Chairman of the event said that let us ask ourselves: will hierarchal standards, rules, statutes or regulations expand existing market boundaries? Will they open unknown markets or untapped market spaces?”

He made reference to the pension industry which was the traditional business of insurance before the Pension Reform Act of 2004, thereby pushing pension assets to over N7 trillion through technical capacity, good governance and best practices as against the figure of N70 billion for the several decades it operated under the insurance industry.

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

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