Insurers explore mergers, acquisition option for solvency

A NUMBER of underwriting companies in the country are currently holding discussions for mergers and acquisition option, to escape sanction from the National Insurance Commission (NAICOM) for insolvency.Besides, foreign investors from the European Union, Japan and China are buying into some of the insurance institutions divested by the banks, following the directive from Central Bank of Nigeria (CBN) requiring financial institutions to divest from non-banking activities.The Commissioner for Insurance, Fola Daniel, said at a seminar in Lagos that six underwriting companies are currently holding merger discussions to meet regulatory requirements.Although, he declined to name the companies involved, but he said that the underwriting firms, among others, are currently under regulatory watch, following inspectorate reports which observed deficiencies relating to their solvency.The seminar was organised by the Financial Services Group of the Lagos Chamber of Commerce and Industry.Daniel added that 'following the CBN's directive requiring all banks to divert from non-banking activities, a number of foreign investors from the European Union, and the Asian countries are buying into the bank-owned insurance institutions divested by the banks.'This is a very good development for the insurance industry in Nigeria and if our guess is right, we may have not more than 20 to 25 big and strong underwriting companies in the industry in the nearest future.'Insurance is the most favoured risk transfer mechanism, many diverse claims such as the victims of severe floods, motor accident, fire accident, claims emerging from explosions, air crashes, have all tested the resilience of the insurance industry,' he said.According to him, 'a major condition for the development of insurance is an appropriate regulatory regime. The current insurance laws in Nigeria are not only weak but not framework as is the case with most advanced jurisdictions, thus making it nearly impossible for the commission to take regulatory initiatives in urgent and critical situations.'He stressed that to address this constraint, the Federal Government in March 2009, appointed an Insurance Law Review Committee to update all laws and regulations relevant to insurance in Nigeria.
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