Some insurance firms in Nigeria have reportedly resorted to selling off their real estate assets, as the new December 2020 recapitalisation deadline set by the National Insurance Commission (NAICOM) draws nearer.
As Nairametrics earlier reported, NAICOM is requiring that all the insurance companies offering Life, Non-Life, Composite and reinsurance packages, must increase their capital base from N2 billion, N3 billion, N5 billion and N10 billion to N8 billion, N10 billion, N18 billion and N20 billion, respectively.
As expected, the development threw a lot of insurance companies into a frenzy, with many scampering to meet the deadline. Some have even resorted to raise capital through rights issues and commercial paper issuances.
And now, other insurance operatoes are exploring selling off their real estate properties in order to shore up capital and fulfil the financial requirement.
It should be noted that NAICOM is not recognising real estate properties as capital in the recapitalisation process. This is why these insurance companies are having to sell off their properties in order to raise cash.
Unfortunately, they are facing some challenges in this regard. According to Daily Sun, saturation in the Nigerian real estate sector is making it difficult for some of the insurance companies to find potential buyers for their properties. Some of these insurance companies are AXA Mansard and Niger Insurance.
On the other hand, the Chief Executive Officer of Cornerstone Insurance Plc, Ganiyu Musa, disclosed that for a long time, his company resisted the idea of selling off its landed properties until it had no choice but to. According to him, the company has been able to realise billions of naira from the sale of some of its real estate assets. He said:
“Of course, our original intention was to hold it for the long term but shortly after we completed it, NAICOM then came up with the recapitalisation programme and unfortunately, one of the provisions of the exercise is that investments in properties would not be allowed as admissible asset.
“So, we are now in a situation where we have invested about N4 billion of our funds and the regulator is saying, ‘Oh sorry! This N4 billion will not count.’ We took the big decision to sell the property which we did at a very handsome price.
“And just in one fell swoop, it resolved many issues. We now have a significant amount of liquidity, we do not have the headache of recapitalisation and we have done what the regulator wants, which is to convert any property to cash.”