Depleting capital: Insurers seek access to N30bn statutory deposit

HAVING witnessed massive capital depletion while the economic downturn persists, a segment of the insurance industry, especially the fringe players are now lobbying the regulatory authorities to have access to their statutory deposit lodged in the Central Bank of Nigeria, CBN.
With industry statutory deposit in excess of N30 billion, marginal players are of the view that allowing them access to the fund will go a long way in boosting their investment income.
Statutory deposits represent amounts deposited with the CBN in accordance with section 9(1) and section 10(3) of the Insurance Act 2003. The cash amount held is considered to be restricted cash as the insurers do not have access to the balances in its day to day activities. According to the Insurance Act, 2003, in the case of existing companies, an equivalent of 10 per cent of the minimum paid-up share capital shall be deposited with the CBN. Any statutory deposit made shall attract interest at the minimum lending rate of the apex bank on every first day of each year.
Although top end operators argue that the statutory deposit is quite insignificant to their business operations when compared to their asset base, the marginal players are of the view that it will impact greatly on their investment income if granted access to it.
The Central Bank of Nigeria, CBN, headquaters, Abuja
While some players have submitted and gotten approval for their financial results for the 2016 financial year, a few others are struggling to do same, due to pressures on their balance sheet.
The Nigerian Stock Exchange had suspended some of them previous week.
Analysis of companies that have so far gotten approval for their 2016 accounts shows that of the 41 companies that forwarded their accounts, 32 were approved while that of nine underwriters were queried.
Meanwhile, 13 other firms including Goldlink Insurance, Nicon Insurance, Industrial & General Insurance, IGI; International Energy Insurance, IEI; African Alliance, NAIC Insurance, Unic Insurance, Great Nigeria Insurance, among others, are yet to forward their accounts.
Recall that for many corporate organisations and financial institutions in Nigeria, the year 2016 was a difficult one for business owners and operators alike with its attendant challenges.
Insurance industry operators pointed out that the sector was carrying the burden of adverse macroeconomic situation of the country, as fewer insurance underwritings were available while many others, including corporate clients, failed there premium obligations.
The situation, according to them, have now compelled them to lobby for a liquidity flow from the statutory deposits to enable them meet funding gaps.
Statutory deposits/total assets
Vanguard analysis of the 2016 financial results of some insurance firms revealed that Cornerstone Insurance had a statutory deposit of N800 million with total assets of N21.4 billion. Custodian & Allied Group had N802 million as statutory deposit, while its total assets stood at N68.1 billion. FBN Insurance had statutory deposit of N500 million while total assets stood at N31.7 billion. Aiico Insurance had statutory deposit of N530 million with total assets at N77.5 billion.
Law Union and Rock Insurance had statutory deposit of N315 million while total assets stood at N8.6 billion. Nem Insurance had statutory deposit of N320 million while total assets was N14.5 billion. Unity Kapital Insurance had statutory deposit of N355 million while total assets was N12.4 billion. Wapic insurance had statutory deposits of N617,632 million while total assets was N12.7 billion. Axa Mansard Insurance had statutory deposit of N500 million while total assets was N54.9 billion. Mutual Benefits had statutory deposit of N500 million while total assets was N51.5 billion. Regency Alliance had statutory deposit of N376,532 million while total assets stood at N8.5 billion