By: Ikenna Oluka
Capitalization has been the major problem in Africa that affects insurance and reinsurance companies, says the Group Managing Director/CEO, Continental Reinsurance (CRe Plc), Dr. Femi Oyetunji.
He stated this during a recent chat with select Business Editors in Lagos, adding that this has become an impediment to insurance and reinsurance companies seeking big stick transactions.
According to him, the insurance companies need continuous recapitalization to meet demands from major sectors that are highly capitalized.
“Insurance sector in Nigeria is faced with the same issues like most other countries. We need well and highly capitalised companies. Personally, this is the same sentiment I expressed in 2005 and 2006.
“It is time for insurance companies in Nigeria to consider merging with one another to build big institutions that will compete globally. We must merge and build big institutions else, the insurance companies outside Nigeria will be picking up our businesses”, the CRe Plc, GMD said.
Asked if he supports National Insurance Commission (NAICOM’s) moves for insurance companies to recapitalize, he said:
“Of course, insurance companies do not need to wait for the regulator to ask them to recapitalize.
“For Continental Reinsurance, we started some 30 years ago as a local Nigerian company. In 2006, we were able to recapitalise by injecting capital from a private equity called Emerging Capital Partners (ECP) from Washington, USA.
“Thankfully, 2006/2007 saw the transformation of Continental Re in terms of governance and process thanks to the ECP. I joined the company in 2011 and what I saw then was that we were a multinational company although we were seeing ourselves as a Nigerian local company.
“However, we took a decision that there was need to close the gap in capital market across the continent and we felt strongly that Continental Re should fill that gap to create a strategy because we have a vision to be a premier insurance company”.
Recall, that CRe Plc recently commenced processes for a Scheme of Arrangement for the Proposed Restructuring which is undergoing necessary regulatory processes.
Speaking on why the leading reinsurance company in Africa with 40% of its operations in Nigeria needs such restructuring, he said:
“If you follow the rating agencies, the rating is directly or indirectly limited by your domicile head office. I used the word domicile because there are a lot of misconceptions in what we are trying to do.
“Because of some of the things we have put in place, in 2012, we were upgraded to B+. In Africa, we have one company that is ‘A’, we have two that are B++ and we are B+.
“In terms of what we could do internally, in terms enterprise risk management and the quality of underwriting process, we have gone two notches above the re-sovereign rating of Nigeria and we cannot go higher.
“We cannot achieve what we want to do with the capital in Nigeria, even if we increase our capital to $500 million, it will not get us to where we are going.
“What we have done, as it also works for international ratings agencies and consultants, is to look for an environment with higher ratings that will assist us to get to where we are going. After a careful selection and in terms of simplicity, we choose to set up a holding company in Mauritius”.
Dr. Oyetunji, further stated that the Company’s focus and amount of capital to be dedicated to Nigeria will only continue to increase.
Source: Techeconomy