THERE is anxiety in the insurance industry over the recapitalisation directive issued by the National Insurance Commission (NAICOM) to Chief Executive Officers (CEOs).
Some CEOs have kept mum over the new development that will categorise them into Tier 1, Tier 2 and Tier 3; others are worried over the ‘’wrong’’ timing of the regulator’s directive.
NAICOM last week introduced a Tier-Based Minimum Solvency Capital (TBMSC) structure, a complementary measure to its ongoing implementation of the Risk-Based Supervision (RBS) model that will lead to recapitalisation by the risk-bearing firms.
It said with effect from January 1, next year, the companies will be classified into three different tiers based on their individual strength and capacity to underwrite big or small risk. Under the new arrangement, Tier 1 companies will be considered as the biggest player, Tier 2, the middle player and Tier 3, the smallest player.
One of the CEOs, who spoke on condition of anonymity, said it is worrisome why the regulator should choose this time of the year to roll out such a directive.
Though he said had nothing against the Commission’s plan to make companies recapitalise, he faulted the timing, which he said, wasn’t appropriate considering the imminence of a general election in the country.
He said aside that it would be difficult to achieve the set target in five months, it would be also be extremely difficult to raise money during an election year.
He said: “We are not saying that recapitalisation is not good, but the timing is inappropriate. Election is coming next year and it will be difficult to raise money. The Commission expects us to merge or acquire, but it will be difficult to achieve either of these in five months.
“The operators and the regulator just started the rebranding process of the industry. We need to win the people’s trust and the regulator is now talking of Tier 1, Tier 2 and Tier 3.”
Another CEO kept mum, but continuously said: “It is well” when contacted while another said he and his management team are preparing to meet with the Board of Directors to brief them on the implications of the new development.
Another CEO urged the regulator to be cautious of the likely negative impact the move would have on the image of operators in the industry.
According to him, classifying a company small and big creates a negative image for the companies as not many people would like to go and patronise a company already classified as small by no less and organisation than the regulator.
The RBS model will see the insurance industry recapitalise following the recapitalisation exercise carried out in 2007.