TO be or not to be?

And that appear to be the new song on the lips of insurance managers as the National Insurance Commission (NAICOM) yesterday commenced the full scale verification of the claims of insurance companies on their recapitalisation and consolidation status.

NAICOM had in deploying its officers and consultants into the field, warned against any act of compromise, conspiracy or omission in the crossing checking the details of the submissions made by insurance and reinsurance companies.

The National Insurance Commission had while issuing guidelines on the recapitalisation and consolidation of insurance companies said that it will reserve the last quarter of the year for the verification of the claims and submissions made to it by companies.

Top on the check list of the NAICOM officials charged with the verification exercise is to ascertain the true values and sources of capitals raised by companies, ensure that the appropriate proportion of the funds have been kept in the escrow account as directed as well as to confirmed that the composition of what constitutes shareholders funds are not in violation of laid-down rules.

An official of NAICOM who spoke to Champion Insurance at the weekend had informed that the yesterday's commencement of the verification exercise stands out as the most crucial aspect of the on-going recapitalisation and consolidation projects.

According to our source, the success or failure of the exercise will depend largely on the dedication and sincerity of purpose on the part of the verification team.

It was against this backdrop that NAICOM was said to have engaged consultants to act as backups to its officials.

here is high level apprehension in the market place that any attempt on the part of NAICOM to enforce every and all the rules relating to recapitalisation and consolidation will spell doom for operators.

It would be recalled that most companies had in the process of meeting up the new minimum capital requirement of the federal government, embarked on sundry activities including assets revaluations. This, the Commissioner for Insurance, Chief O. E. Chukwulozie has said, will not be allowed.

Also worrisome to the commission is the misinterpretation of NAICOM's position on the issue of unpaid premium.

Chief Chukwulozie was reported to have frawned at the rate at which company executives mislead their accounting officers into accommodating 50 per cent of their outstanding premiums as part of shareholders' funds.

A senior officer of the commission who spoke with Champion Insurance on the condition of anonymity had informed that 50 per cent of any company's outstanding premium can only be admitted so long as the 50 per cent is less than 10 per cent of the total funds.

"I don't think that the commission will want the situation where companies pack the whole of their outstanding premiums into the system. We have explained it that the whole thing should not be more than 10 per cent of the total funds," the source had emphasised.

The mere fact that the continued survival of any insurance company in the market will depend on the verdict of the NAICOM investigators brings more weight to bear on the on-going verification exercise.

Chief client officer of Guarantee Trust Assurance Plc, Mr. Tosin Runsewe had said recently that not more than 25 companies, the same as the banks will emerge at the end of the consolidation project.

Mr. Runsewe was quick to alley fears that the possible reduction in the number of companies will mean a shrink in the volume of business as he predicted an over N400 billion premium income by the turn of 2010.

"By 2009, without retail, the industry will make about N200 billion. But with retail, the figure could be as high as N400 billion," Runsewe predicted, adding that the current recapitalisation exercise is just the first in the series. Another one, according to him, is expected within the next three years, as the industry needs huge capital to operate successfully.

"The industry which has sustained a growth rate of 22 per cent over the last five years without any major additional growth driver, is expected to witness massive growth rate over the next five years. It is estimated that this growth rate will be sustained for normal business transactions. However, there is an additional growth potential of up to N50 billion expected to be infused into the industry as early as 2007", Runsewe said.

While describing the consolidation exercise as the best thing to have happened to the industry, he said the post-consolidation era would witness a more robust industry with higher rates, higher profit margins as well as increased underwriting and retention capacity.

But the count to the confirmation of the companies to survive started really good yesterday as verification officers took over companies to ascertain their true health.

Meanwhile, the authorities at the Central Bank of Nigeria (CBN) who are keeping tab on the insurance industry's consolidation project said that it was not aware of any single company to have been recertified.

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By Kelvin Egerue
Lagos

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