Following the financial crisis weighing down the fortunes of some insurance companies in Nigeria, the National Insurance Commission (NAICOM), the industry regulator has foreclosed the possibility of assisting them financially through a bailout to save it from collapse.
The regulator said the insurance law did not make any provision for financial bailout to assist ailing underwriting firms, according to Assistant Director, Inspectorate at the Commission, Adamu Ahmad, at a workshop held in Gombe State.
Instead, he urged insurance companies to work hard to bail out themselves before seeking external help.
“Under insurance, the law does not give us power to bail out ailing insurance companies. Before you even talk of bailout, the companies should be able to bail themselves out. We have seen the problems with bailout,” he said.
NAICOM’s position conflicts with that of the banking sector where ailing lenders have been rescued financially through bailout and outright take over by the Asset Management Corporation of Nigeria (AMCON), a debt buying firm.
Ahmad said apart from the law foreclosing bailout for insurance, the Commission does not also believe in government using its resources to fund reckless spending by the board and management of any organisation.
The assistant director maintained this position following the critical state of some insurance companies that are currently under regulatory scrutiny.
Some of the firms involved are International Energy Insurance; Investment and Allied; Goldlink Insurance; Industrial and General Insurance; and Unity Kapital, and a host of others.
Investigation conducted by NAICOM revealed massive manipulations of shares and reckless spending by the board and management of the companies.
Only last week, the Commissioner for Insurance, Mohammed Kari, disclosed that some companies’ board members falsely acquired shares without paying for them.
He specifically said one of the fraudulent chairmen had refunded N66 million to the coffers of an insurance company as part of what he wrongfully appropriated.
Recall that the interim management board of Goldlink Insurance Plc, set up by NAICOM, in a share capital audit that looked into the activities of the former management, observed that about 2.5 billion shares were inappropriately issued to select shareholders.
A report of investigation carried out by the Commission revealed that to support the creation of the bubble shares (rapid escalation of price followed by decline), the head office building and other assets of the company were re-valued and inflated by about N1.5 billion.
The revaluation surplus was used in part to create these shares against sound accounting standards and principles. So far, the interim management board has recovered 1.2 billion shares through voluntary surrender and about 134 million shares by way of forfeiture.
It was also discovered that about 1.2 billion share unit were disposed of by some of the beneficiaries, while the interim management board has commenced the process of recovering the disposed shares and associated dividends of about N125 million.