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Sequel to the new capitalisation requirement for all insurance companies released by the National Insurance Commission (NAICOM) last week, FBN Insurance Group has announced plans to be a Tier 1 Company.

FBNInsurance Limited Managing Director, Val Ojumah, noted that FBNInsurance Limited and FBN General Insurance Limited have the financial wherewithal to operate in the Tier 1 category.

He further noted that the newly introduced Risk Based Supervision RBS will send a clear message to investors and remove the negative impression about most insurance companies been fringe players.

In his words:

“We have so many fringe players and as a result, we have suffered as an industry from all sorts of malpractices. If you look at the financials of many companies, you will find out that many of them are indeed, struggling and because they are struggling, they tend to try to survive by doing whatever and this has brought collective shame to the industry.”

The new capital requirements announced by NAICOM

Tier one is the highest capital base for each class. Tier three is the minimum capital base required for each class.

Life insurance firms now have three captalisation tiers. Tier one companies will be required to have N6 billion as capital. Tier two life insurance firms will be required to have N3 billion, while tier 3 firms will maintain the current requirements of N2 billion.

Non-life insurance firms will now have three tiers. Tier one non-life firms are mandated to have a capital base of N9 billion. Firms in tier two segment are expected to have a capital base of N4.5 billion, while tier 3 firms will maintain the current capital base of N3 billion.

Insurance companies operating in the composite segment, that is all classes of insurance now have three tiers. Companies operating in the tier one will be required to have a capital base of N15 billion. Tier two firms will need to have a capital base of N7.5 billion, while those in tier 3 will maintain the current capital base of N5 billion.

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Deadline to meet the new requirements is January 2019.

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The way forward for players in the Insurance sector

The new requirement could lead to several mergers and acquisitions in the insurance sector. Raising capital through equity may be difficult for many of the firms, as many of them currently trade at N0.20 price floor.  Retail investors who have suffered a huge loss on their investments, will also be reluctant to partake in the exercise.

However, in anticipation of the new requirements, several insurance firms had initiated moves to raise capital. Mutual Benefits insurance, earlier this month had obtained regulatory and shareholder approval to raise N5 billion through a rights issue. Wapic insurance in May last year, obtained the approval of shareholders to raise up to N10 billion in fresh capital.

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Consolidated Hallmark Insurance in October last year, raised N500 million through a rights issue.

About the company

In February 2010, NAICOM granted an operating licence to First Bank of Nigeria Plc. (FirstBank) to establish a life assurance business in partnership with Sanlam Group of South Africa.

Consequently, First Bank incorporated a subsidiary, FBN Life Assurance Limited. First Bank has a holding of 65% in the equity of FBN Life Assurance Limited. Consequent upon the restructuring of 2012, the investment is transferred to FBN Holdings Plc. and the name of the company was changed to FBN Insurance Limited in 2014. The segment recorded N10 billion in revenue in its half-year financial reports for the period ended 31st June 2018.

Fikayo has a degree in computer science with economics from Obafemi Awolowo University. ITIL v3 in IT service management. An alumnus of Daystar Leadership Academy. Prior to joining Nairametrics had stinct in Project management, Telecommunications among others. Also training in Consulting and Investment banking from Edubridge Academy. He has very keen interest in Politics, Agri-business, private equity and global economics. He loves travelling and watching football. You can contact him via fikayo.owoeye@nairametrics.com

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