The apex regulator of the insurance sector, National Insurance Commission ("NAICOM") in 2019 issued directives for the increase in the minimum paid-up share capital requirement for all classes of insurance companies in Nigeria1 . The effective date for compliance with the recapitalisation was initially extended from 30 June 2020 to 31 December 20202 and has recently been revised into two phases due to the impact of the COVID-19 pandemic. The first phase requires a partial compliance of 50% for insurance and 60% for reinsurance companies respectively by 31 December 2020. However, the second phase and deadline for full compliance is due by 30 September 20213 .

This article explores the (i) impact of external factors on insurance companies' ability to meet the recapitalization requirement; (ii) options available to insurance companies to meet the recapitalisation requirements and expanding their businesses; and (iii) factors to consider in implementing the options.


Following the deadline for submission of recapitalisation plans in August 2019, NAICOM has since confirmed receipt of plans from 47 insurers and 2 reinsurers, with 26 companies having received 'no objection' to their recapitalisation plans4 . Thus, it is expected that most companies have set their recapitalization plans in motion. However, with the disruptions caused by the COVID-19 pandemic and the containment measures in Nigeria, it would be insurmountable to ascertain the degree these disruptions may have on the recapitalization efforts of insurers. Consequently, insurers need to re-assess their recapitalization contingencies for a more informed business continuity strategy. There are overwhelming indications of a possible global economic recession as a consequence of the COVID-19 pandemic, with economic growth in Sub Saharan Africa predicted to plummet from 2.4% in 2019 to -5.1% in 20205 . These predictions would undoubtedly affect investor sentiment and could result in lower investment activity in the short term. As most insurers plan to raise capital through share premium, capitalisation of retained earnings, initial public offerings, rights issues and private placement6 ("Options"); a slowdown in investment activity will adversely impact the effectiveness of some of these Options in meeting the recapitalisation deadline.

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1 NAICOM, 'Minimum Paid-up Share Capital Policy for Insurance and Reinsurance Companies in Nigeria' 20 May 2019 (Circular No: NAICOM/DPR/CIR/25/2019)

2 NAICOM, 'Minimum Paid-up Share Capital Policy for Insurance and Reinsurance Companies in Nigeria' 30 December 2019 (Circular No: NAICOM/DPR/CIR/25-03/2019)

3 NAICOM, 'Segmentation of Minimum Paid Up Share Capital Requirement for Insurance Companies in Nigeria' 3 June 2020 (Circular No: NAICOM/DPR/CIR/25-04/2020)

4 NAICOM, 'Update on recapitalisation of insurers and reinsurers' 23 September 2019 accessed on 26 June 2020

5 Calderon, Cesar; Kambou, Gerard; Zebaze Djiofack, Calvin; Korman, Vijdan; Kubota, Megumi; Cantu Canales, Catalina. 2020. Africa's Pulse, No. 21, Spring 2020: An Analysis of Issues Shaping Africa's Economic Future. World Bank, Washington, DC. © World Bank. License: CC BY 3.0 IGO.

6 NIPC, 'Recapitalisation: six insurance companies set to merge' 8 January 2020 accessed on 26 June 2020

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