Nigeria to Check Capital of Underwriters as Recession Weighs

LAGOS (Capital Markets in Africa) – Nigeria’s insurance regulator plans to audit the capital position of underwriters to ensure their ability to pay out claims as the country struggles to recover from a recession.

The verification, scheduled for the first quarter, aims to protect “policyholders and beneficiaries of insurance contracts against unexpected losses,’’ the Abuja-based National Insurance Commission said in an e-mailed statement Monday. Nigeria’s economic downturn and conditions specific to the industry “have created the need for high level of prudence, innovation, pro-activity, and agility in both operations and regulations,’’ it said.

Nigeria is under pressure from a slide in oil prices and a shortage of foreign currency that are making it tough for businesses to meet their obligations to underwriters and lenders. The economy contracted in the first three-quarters of 2016, putting the country on course for its first full-year recession in a quarter century.

The insurance regulator will track companies for signs that spending is hurting profitability, liquidity or capital adequacy ratios, it said. It also plans to issue guidelines this month on supervision to align exposure of companies to their capital levels, the commission said.

“The ability of the insurance industry to take a risk and meet obligations have been affected by the macro development in the country, making it imperative for the regulator to step in,’’ Sewa Wusu, head of research and investment advisory at SCM Capital Ltd. in Lagos, said by phone. “It will take proper capital and risk regulation for the industry to underwrite huge assets and meet their obligations in key sectors such as oil and gas, shipping and aviation.’’