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N200b insurers’ funds trapped in stock market – NIA

By on September 1, 2011

About N200billion representing 40 per cent of insurers’ funds are trapped in the capital market, according to the 2010/2011 Annual Reports and Account released by the Nigerian Insurers Association (NIA), the trapped funds are part of the industry’s capital base, which is in excess of N500 billion.

The report stated that Life Insurers hold about 40 per cent of their investment in equities, while Non-Life Insurers have about 44 per cent. The report noted that insurers have greater per cent of their investment in equities.  Chairman of NIA Mr Olusola Ladipo-Ajayi, said the crisis in the capital market has impacted negatively on industry’s shareholders’ fund, adding that the situation is responsible for the inability of some insurers to pay dividend.

He said: “Following the crisis that rocked the nation’s capital market in 2010, the investment performance of member companies were less than optimal. This may have impacted negatively on some of our members’ shareholders’ fund and payment of dividends to shareholders. “It is expected, however, that the various returns subsequent to the crisis, the initiatives of the National Insurance (NAICOM) and NIA’s programme of enhancing members’service delivery will turn the situation around for good for the industry.”

President, Nigerian Shareholders’ Renaissance Association (NSRA) Mr Olufemi Timothy, said some insurers have reduced their equity holdings, adding that most of the operators sold their stake in the capital at a loss. He noted that insurers need to be more proactive to attract investors’ confidence. Timothy said investors are pulling away from insurance due to the industry’s poor performance, adding that the inability of most companies to pay dividend portend bad omen for the industry.

President, Independent Shareholders Association of Nigeria (ISAN)Mr Sunny Nwosu, said  investors are worried over the price of insurance stock, adding that urgent steps should be taken by the government, regulators and operators to reverse the trend. He called on operators to liaise with regulators to find last solutions to the problem that has befallen the capital market in recent times.

Nwosu urged insurers to redouble their efforts in products and service delivery, adding that the various initiatives introduced by the NAICOM should be leveraged on to improve the industry. He said: “To grow the industry, all new initiative by NAICOM, such as compulsory insurance for building and buildings under construction, should be looked into effectively. Operators must begin to seek ways to improve their services. They should also consider areas that have not been tapped.  ”I will also call on the regulators, especially the Securities and Exchange Commission (SEC), to retrace its steps to stop further damage on the capital market.”