…presents opportunity for industry partnerships
Contrary to sentiments expressed by some players in the insurance industry – that the proposed recapitalisation exercise will put a strain on existing firms, a proper understanding of the rationale behind it and its potential impact shows that the move bodes well for the industry, as it will lead to enhanced capacity of firms, ensure greater resilience and drive the insurance penetration rate in the country, Group CEO of Hollard Ghana Patience Akyianu has said.
While arguing that the enforcement could be deferred for a few months to accommodate the disruptions brought about by the pandemic, which have led to a slowdown of economic output and consumer spending, she stated that a lengthy delay would not be in the industry’s best interests.
Speaking exclusively to B&FT, the recently-crowned CIMG Marketing Woman of the Year suggested that barring any further significant nation-wide disruptions, a deferral beyond December 2021 – six months after the original timeframe of June 2021 – would result in an erosion of gains made recently by the industry.
“This is an industry in dire need of building capacity, and one of the ways this can be effectively achieved is through increasing the stated capital. This must be done as quickly as possible, as it will result in the creation of a stronger industry that will be able to take on more risk and be more supportive of businesses,” she said.
She added that the move could present a number of opportunities for firms which might be unable to raise the stated capital internally – with the provision of more dedicated, niche operations touted as one such position.
Furthermore, she expressed belief that many firms would benefit from partnerships, as mergers present the opportunity to not only raise required capital but also pool together some of the best human resources; a situation that would serve to drive innovation and move the industry further.
“If raising the needed capital becomes very difficult, companies must look to partner the right people. It may be better to consolidate, as this would lead to improved effectiveness.”
Mrs. Akyianu revealed that Hollard Ghana is well-placed to meet the minimum stated capital requirement internally through a combination of the capitalisation of relevant reserves it has built over time, particularly for its general business – with the possibility of a further injection for its life operations from the Hollard Group.
Industry regulator, the National Insurance Commission (NIC), in June 2019 announced an upward adjustment of the minimum stated capital for various classes of entities under its mandate.
The move was done as ‘part of ongoing efforts to stabilise, strengthen and enhance the financial services sector’s capacity to support socio-economic development’, and will see the minimum stated capital requirement for Life and Non-Life entities rise by 233.33% from GH¢15million to GH¢50million; reinsurance companies, 212.5% from GH¢40million to GH¢125million; and insurance broking companies’ loss-adjustors to GH¢500,000 from GH¢300,000 effective July 2021.