Distressed insurance firms will have no respite as the Assistant Director, Inspectorate at the National Insurance Commission (NAICOM), Adamu Ahmad, as said that there is no possibility of a bailout for these companies.
Speaking at a workshop held in Gombe State, Ahmad said the insurance law did not make any provision for financial bailout to assist ailing underwriting firms. “Under insurance, the law does not give us power to bail out ailing insurance companies” Ahmad said.
This is in contrast with the current ongoing in the banking sector where distressed banks have been rescued by bailout funds or have been totally taken over by the Asset Management Corporation of Nigeria (AMCON).
According to Guardian, investigation conducted by NAICOM revealed massive manipulations of shares and reckless spending by the board and management of the companies.
This further supports what the Commissioner for Insurance, Mohammed Kari, disclosed last week about some companies’ board members falsely acquiring shares without paying for them. He specifically said one of the fraudulent chairmen had refunded N66 million to the coffers of an insurance company as part of what he wrongfully appropriated.
Similarly, NAICOM, through an interim management board had discovered that about 2.5 billion shares of Goldlink Insurance were inappropriately issued to select shareholders. It is following these revelations that Ahmad insists that apart from the legal issues involved, there is the need for insurance companies to ‘help themselves’, indicating that their distressed situation was in some way due to their own making.
“Before you even talk of bailout, the companies should be able to bail themselves out. We have seen the problems with bailout,” he said.
Unfortunately, he did not reveal the names of other insurance companies that may be at risk of going bust. The implication of a solvent insurance company is that claims may not be paid leaving insurers to assume risk in the case of fire, theft or any event that can impact on profitability.
Nigerian Insurance firms are mostly badly run, under capitalised and are notorious for poor corporate governance.