The Africa Continental Free Trade Area’s (AfCFTA) advent will enable local insurance companies to become competitive and progressive, Chief Executive Officer of Africa Sureties and Insurance Advisory Company, Solomon Lartey, has said.
According to him, many gains will be made – especially at a time when the insurance regulator, National Insurance Authority (NIC), has asked its members to recapitalise to the tune of GH¢50million (US$8.1million) for life and non-life insurers; with that of reinsurance companies moving from GH¢40million (US$6.4million) to GH¢125million (US$20.2million).
Mr. Lartey in an interview with the B&FT noted that the local insurance companies will benefit more because the new capital requirement seeks to increase local retention of the premiums.
“Now you have enough capital available to handle local risk. From January 2022, the majority of companies will have recapitalised; and as an advisor, consultant and broker, I see that most of the companies are ready. So, Ghana is on the right track; the effect is actually going to be positive rather than negative,” Mr. Lartey emphasised.
Contrary to reports that local insurance companies might lose out on big tickets should insurance giants on the continent penetrate the Ghanaian market, Mr. Lartey claims the industry has the capacity to underwrite just as much as the big companies can write.
Mergers and acquisitions
Commenting on their cessation of operations by February 1, 2022 should any insurance company not meet the recapitalisation requirements, the insurance mogul indicated that most insurance companies in the country have already taken steps to do the right thing.
He expressed doubt that any of the insurance companies will fall, but was quick to add that mergers and acquisitions have already taken place; however, he was tight-lipped as to the companies involved.
“I am really glad and confident to say that the situation with insurance companies will not be the same as what happened in the banking sector; because I think the insurance regulator, the National Insurance Commission, has done a very good job in the build-up to this.
“First of all, they brought the minimum capital requirement; they gave ample time and COVID-19 came and they gave time again. So, I think the insurance companies have had enough time to know exactly what they want to do. I know there have been some takeovers, mergers and acquisitions in the market.”
No job losses
Mr. Lartey further assured that should there be any liquidation due to the recapitalisation, it won’t be as severe as what happened to the banking sector in 2017 – adding that due to the ongoing mergers, job losses will be very minimal or nothing at all.
“I don’t expect major losses; maybe if one or two companies go down, the negative effect won’t be up to a thousand job losses because you need to look at the chain. The employees of those companies may not be direct employees but under an agency, therefore they can quickly take them to other insurance companies. And if you talk about the claims, the NIC has made various provisions; the new act makes provisions for various ways of dealing with that,” he indicated.