FOREIGN buyers come into the Nigerian insurance industry with conditions that are not friendly with the country’s operating environment.
Managing Director of NEM Insurance Plc, Mr. Tope Smart, in an interview with Vanguard in Kampala, Uganda, on the sidelines of the African Insurance Organisation Conference, said the nation’s insurance companies are not scared of foreign buyers but for the conditions they come with which are often alien to the Nigerian industry environment.
He said, “Foreign investors in the Nigerian insurance market have shown a preference for acquisition or partnership above setting up new insurance operations but the terms and conditions they bring along are too harsh for the Nigeria insurance market. The opportunity is boosted by the fact that foreign investors are allowed to own a 100 per cent share in Nigerian insurance companies, an acquisition which often spell doom for existing staff of the local companies.”
Notable acquisitions in 2013 included the acquisition of Oasis Insurance by FBN Life Assurance (FBN), jointly owned by First Bank of Nigeria and South African insurer Sanlam. Old Mutual Plc, through its emerging markets business, also completed its acquisition of Oceanic Insurance Company and Oceanic Life Insurance.
The industry remains highly fragmented, with 58 companies in operation, Much of this consolidation has come since 2005 when the National Insurance Commission (Naicom), the regulator, introduced new capital requirements, whittling down the number of insurers to 49 in 2007 from 97 in 2005.
Smart, however, welcomed foreign buyers to the country’s insurance companies, noting, “It is a welcome development if you ask me. I don’t think any local company should be afraid of foreign entrance. When the foreign buyer’s terms and conditions are acceptable, of course, definitely foreign investments are welcome to buy into an insurance company, more so, when they are coming in with some skills, expertise and some other benefits to the company, I don’t think any local company will want to discountenance that.”
The NEM Insurance MD emphasized, “Not that anybody is scared but as far as I am concerned, provided they are able to add value. I must say that it is welcomed development in the market.” However, Smart said it is not in all cases that foreign buy-over companies perform better than local ones.”
He stated, “Don’t forget that how many of them who have come in have been able to discipline themselves or are even better than the local ones. We have some of the foreign companies that are in Nigeria at the moment, how many of them are better than the local ones.”