Nigeria has tripled the minimum capital requirement for insurers, as the country's regulator looks to reduce the risk levels inherent in the industry.
Insurance firms based in Nigeria have until June 2020 to comply with the new threshold. For any licences issued to new insurers or policies, the new higher level is effective immediately.
The reforms are being implemented by the governent regulator, the National Insurance Commission (or Naicom), based in Abuja. An earlier proposal by Naicom for the reform to be implemented in 2018 was blocked by the courts last year.
We expect that this will lead to mergers, acquisitions and capital-raising activities that should stir activities in the equity market.”
Under the new, passed, reform, insurance policies which combine life, property and business will need capital of at least NGN 18bn ($50m). Pre-reform this would have entailed NGN 5bn ($13m). The minimum policy to cover property and casualty business is now NGN 10bn or $26m (up from NGN 3bn or $8.3m). Life insurance policies have risen to NGN 8bn from NGN 2bn.
Lagos-based CSL Stockbrokers issued a statemtent to say that the recapitalization will lead to "insurance firms taking on bigger risks. We expect that this will lead to mergers, acquisitions and capital-raising activities that should stir activities in the equity market."
Kunle Ahmed, chief executive of AXA Mansard, told Economic Confidential that there will "certainly be some consolidations and fund raising among insurers in the coming months."