2007 Recapitalisation: Insurance Firms tackle FG on tax concession

KELVIN EGERUE

THE last may not have been heard of the last recapitalization and consolidation exercises conducted by insurance companies in Nigeria as companies which survived the onslaught are now crying blue murder.

The 51 insurance and reinsurance companies which emerged from the exercise from the over 126 firms which engaged in it are now accusing the federal government of double dealing considering that the authorities failed to apply the same rules for the banks and insurance recapitalization projects.

It was gathered that the federal government had at the heat of the recapitalization programme involving financial institutions in the country promised certain relieves top of which was tax concession.

Unfortunately however, the banks were said to have enjoyed the concession while insurance companies were denied, an anomaly which the regulatory authorities pledged to rectify.

But close to two years after the recapitalization deal was closed in 2007, insurance companies are still struggling to get the attention of government when it comes to the implementation of the tax concession offer.

Not wanting to be left in the cold, the umbrella body of insurance companies in the market, the Nigerian Insurers association (NIA) recently launched a major offensive targeted at getting government’s attention.

It was the president of the Professional Reinsurers Association of Nigeria (PRAN) Mr. Adeyemo Adejumo who let off the lead when he told newsmen early this month that the industry was certain to enjoy the same level of concession granted the banks arguing that it is only reasonable that the government keeps to its promises.

It was the chairman of the NIA Mr. Wole Oshin who gave flesh to the industry’s approach to recouping its loss from the recapitalization exercise when he informed of the constitution of what looks like a lobby group to wrestle the aggregate of the hitherto trapped funds from the government.

Addressing delegates at this year’s annual general meeting of NIA which held at Oceanview Restaurant in Lagos, the chairman revealed that the association has already initiated talks with government.

"We have employed the services of Bayo Osipitan & Co. and it is hoped that we will be able to claim our waivers from government", Mr. Oshin had declared.

Mr. Oshin said that the insurance industry benefited from the recapitalization project considering that the exercise helped in raising industry’s capital base from mere N200 billion to over N670 billion.

He said that indications that the consolidation exercise may have started yielding dividends was made more manifest in the industry’s 2008 trading results which showed an impressive aggregate premium income of N164.5 billion.

Chairman of the umbrella body of insurance companies in the country said that the 2008 industry income was 63.5 per cent higher than the N100.6 billion earned in 2007.

Speaking at the annual general meeting, the 38th in the series as NIA was established in 1971, Mr. Oshin predicted much bigger income earning for the 57 companies that made up NIA in 2009.

He made the projection against the backdrop of concerted efforts at mitigating the adverse effects of the current global financial crisis.

Mr. Oshin had recalled that prior to the collapse of activities at the stock exchanges across the world; the equities of insurance companies commanded the attention of investors at the Nigerian Stock Exchange (NSE) indicative of the performance of the sub-sector.

"As a result of the injection of fresh funds during the recapitalization exercise, capitalization of insurance sector increased from less than N200 billion in 2007 to over N670 billion at its peak in 2008", the NIA chairman head remarked.

According to him, the quantum of claims paid by member companies increased from the 2007 figure of N35.2 billion to N53 .3 billion last year.

The 2008 industry claims outlay may have been influenced the heavy loss sustained by the Nigerian Bottling Company (NBC) which suffered fire damage at its Benin plant. The claim estimate was put at N15 billion even as the consortium of six insurance companies which handled the business made an interim claim payment of N1 billion pending the final report of loss adjusters drafted to adjudicate in the matter. The NBC claim represents the industry single highest fire loss in the market.

But the NIA chairman said yesterday that the nation’s insurance industry is gearing up to bigger participation in the business of oil and gas insurance following the approval of the consortium bidding arrangement by oil majors operating in the country.

Under the consortium bidding arrangement, a select group of insurance companies would be allowed to pull their capital and assets together for the purpose of qualifying to bid for oil and gas insurance.

The move was to counter the age long accusation that Nigerian insurance firms lack the capacity to undertake large risks such as oil and gas.

"We have been able to secure the guidelines on consortium bidding with assistance from the National Insurance commission (NAICOM). Also, the industry presented a joint memorandum to the national assembly during the public hearing on Nigerian oil and gas industry content development bill", Mr. Oshin who doubles as the managing director of Custodian & Allied Insurance Plc further disclosed.

Speaking on the future of the insurance industry in Nigeria, the NIA chairman revealed of plans to ensure the full implementation of the insurance laws prescribing the compulsory insurance of certain properties including buildings under construction.

He had however regretted what he called multiply taxation on insurance saying that such development does not make room for the growth of the sector.

Already, the insurance industry has contracted the services of KPMG Consulting for the purpose of articulating the industry’s position with the view to making fresh presentation to the government.