Lagos: The Chartered Institute of Stockbrokers (CIS) has advised recapitalised insurance companies to see the successful exercise as the beginning of a new phase rather than its end. Dr Benneth Eze, Head of Research and Development at CIS, gave the advice in an interview with the News Agency of Nigeria (NAN) in Lagos.
According to News Agency of Nigeria, Eze emphasized that companies should prioritize protecting shareholders’ capital and resist the temptation to pursue rapid expansion simply because of their stronger capital positions. He stated that recapitalisation should be viewed as the commencement of the next phase in the industry. Eze urged insurers to focus on underwriting discipline, effective claims management, operational efficiency, and risk-adjusted returns.
He stressed that insurers should prioritize quality and profitability over the volume of business written. The critical question should be about underwriting profitable business while maintaining appropriate risk and capital discipline. Eze also advised boards and managements of insurance companies to maintain transparent communication with shareholders regarding the deployment of the fresh capital.
Investors, he noted, should monitor the returns expected from the additional capital and the indicators used to measure performance. He highlighted the importance of assessing recapitalised insurers based on their fundamentals, such as earnings quality, return on equity, solvency, asset quality, liquidity, underwriting performance, corporate governance, dividend sustainability, and valuation.
Eze suggested that insurers invest in human capital, technology, data, and distribution channels to build sustainable competitive advantages. Regulatory compliance, he mentioned, is only the minimum standard. He pointed out that the real test of recapitalisation would be evident over the next several reporting periods when investors would evaluate whether stronger capital bases translate into improved underwriting results, sustainable profitability, competitive returns on equity, and better claims outcomes.
Furthermore, Eze urged insurers to leverage their stronger balance sheets to deepen insurance penetration by developing products that address genuine household and business risks. This approach, he explained, would enhance the broader economic benefits of recapitalisation through improved risk transfer, increased investment, and greater financial protection for households and businesses.