Investors want stronger dividends, wider insurance penetration and tighter governance after 50 insurers and reinsurers met new capital requirements.
Insurance shareholders are demanding stronger dividends, improved corporate governance and tighter regulatory oversight following the completion of the sector’s recapitalisation exercise, arguing that the additional capital should translate into stronger business performance and better investor returns.
The shareholders said the fresh capital positions of insurance companies should enable operators to expand underwriting capacity, develop products, increase market penetration and reach customers beyond the formal economy.
Their demands come after 50 insurance and reinsurance companies met the new minimum capital requirements under the recapitalisation exercise.
The thresholds are N10bn for life insurers, N15bn for non-life insurers, N25bn for composite insurers and N35bn for reinsurers.
With the capital requirements now met by qualifying operators, shareholders said attention should shift toward how insurers deploy their stronger balance sheets to generate sustainable growth and returns.
The National Coordinator of the Independent Shareholders Association of Nigeria, Moses Igbrude, said the sector should significantly improve insurance penetration, which he put at about one per cent.
He urged insurers to use their stronger financial positions to increase the volume of business and expand coverage across the country.
According to him, higher penetration would increase insurers’ revenues and profitability, ultimately creating room for improved shareholder returns.
Igbrude said investors expected the recapitalisation exercise to produce a meaningful change in the financial performance of insurance companies.
He also called for an end to what he described as inadequate dividend payments, arguing that shareholders who had provided additional capital should see tangible benefits from the resulting expansion of insurers’ businesses.
NAICOM faces call for stronger supervision
The shareholders also want the National Insurance Commission to intensify its supervision of the industry now that insurers have larger capital bases and potentially greater underwriting capacity.
Igbrude said increased capital and business volumes should be accompanied by stronger oversight and corporate governance to ensure that companies are properly managed.
He stressed the need for insurers to adhere to industry ethics and strengthen collaboration among operators, employees and other stakeholders.
The shareholder representative argued that effective governance would be critical to ensuring that recapitalisation translates into sustainable growth rather than simply larger balance sheets.
Investors seek stronger protection
The Chairman of the Progressive Shareholders Association of Nigeria, Boniface Okezie, similarly called for greater protection for insurance investors.
Okezie said weak dividend histories had discouraged some investors from putting money into insurance stocks, while some shareholders had funds tied up in companies that subsequently ceased operations.
He noted that some investors who participated in earlier recapitalisation exercises were still awaiting returns on their investments.
For him, the latest recapitalisation should therefore go beyond strengthening the financial position of insurers.
He said the exercise should deliver improved business performance, stronger dividends, better share-price performance and greater investor confidence in insurance stocks.
Recapitalisation raises expectations
The shareholders’ demands highlight the pressure now facing insurers after a major industry-wide capital raising exercise.
Higher capital provides companies with greater capacity to absorb risks and potentially underwrite larger volumes of business. However, shareholders are now looking for evidence that the additional financial strength can be converted into revenue growth, profitability and sustainable returns.
For the industry, increasing insurance penetration will be particularly important. Expanding beyond the existing customer base could provide insurers with a larger premium pool while supporting the broader role of insurance in Nigeria’s economy.
The success of the recapitalisation exercise may therefore ultimately be judged not only by whether insurers meet the new capital thresholds, but by whether the stronger balance sheets lead to greater market penetration, improved financial performance and increased confidence among investors.
As the post-recapitalisation phase begins, shareholders are making it clear that stronger capital must come with stronger results.
