The Nigerian insurance industry has been faced with several reforms especially the recent announcement of increases in the minimum capital base of insurance companies from N200million, N300million and N500million for life, general and composite insurers to N2billion, N3billion and N5billion respectively. This sector reform has triggered strategic actions by insurers to raise their capital base to meet the minimum capital requirements before the deadline of February, 2007.
The implementation of this reform is expected to significantly reduce the number of insurance companies which presently stands at 103. Although, IGI's shareholders funds are in excess of N5billion, the Company has decided to further shore up its capital base through a rights issue that was over subscribed and this private placement of 2,900,000,000 ordinary shares of 50 kobo each at N2.00
per share.
Another major reform is the Pension Reform Act of 2004 which grants authority to the National Pension Commission to licence Pension Funds Administrators (PFA) to manage pension funds liabilities through a contributory pension scheme. IGI Pension Fund Managers Limited, a PFA sponsored by IGI and other partners, has submitted its application for licence with the National Pension Commission and has started putting the necessary infrastructure in place preparatory to receiving an Approval-in-Principle.
Competition
With the adoption of a policy of deregulation and liberalisation by the government and the introduction of reforms on recapitalisation and regulatory oversight by the National Insurance Commission, the insurance industry has undergone positive transformation over the years resulting in increased competition and standards. Furthermore, the privatisation of NICON Insurance Corporation has opened another phase of competition in the insurance market.
Threat of New Entrants
With the current reforms being undertaken and the liberalisation efforts of the Government, the insurance sector is more attractive and new insurance companies may apply for licences to operate in the Nigerian insurance industry. Some banks have already decided to set up insurance companies to support and protect their businesses but we foresee that this is still a fraction of the potentials of the market and thus does not pose a serious threat, since IGI has
an edge in the specialised insurance business.
In addition, insurance penetration and awareness are low in Nigeria. There is also little product differentiation and brand loyalty. New entrants may wish to take advantage of this gap.
The Bargaining Power of Customers
Product differences will register positively with customers and the competition in the industry will give more bargaining power to customers.
Threat of Substitutes
There is no direct substitute to insurance. |
