Cornerstone Insurance Announces Receipt of Escrowed Recapitalisation Funds
Acceler8now.com, November 30, 2007
In what appears to mark the beginning of a new phase of operations for the company and the insurance industry in Nigeria, Cornerstone Insurance Plc yesterday announced the receipt of a substantial part of its recapitalisation funds, escrowed with the Nigerian Central Bank. According to the leading insurance company, it has received N3.8 billion out of a total of N4.3 billion previously held by the Central Bank.
With this development, it is expected that other insurance companies with similar escrowed funds will be receiving theirs as well. It would be recalled that just over a week ago, the Federal Government and the regulatory agency for the insurance sector, the National Insurance Commission (NAICOM), moved to clear the fog that was dampening the insurance sector recapitalisation. Part of the action taken was to invoke the powers of the government to intervene and dissolve the boards and management of the National Insurance Corporation of Nigeria Plc, NICON and the Nigerian Reinsurance Corporation. Interim managements have already been appointed to replace them. The leadership of NICON had earlier gone to court to obtain injunctions that seemingly stalled the finalisation of the verification process initiated by government into the re-certification of recapitalised insurance companies. The earlier re-certification of companies that supposedly met the new capital requirement had been mired in controversy as irregularities were alleged. This prompted the Government, through the supervising Finance Ministry, to order a review. Perhaps anticipating unfavourable outcome from that process, the management of NICON had initiated legal proceedings which sought to restrain the completion of the exercise.
Following its intervention, government had also approved the release of the escrowed funds to the confirmed re-certified insurance companies. The escrowed funds were the proceeds of the new capital injections raised by the insurance companies in response to new mandatory capitalisation levels imposed by the Government as part of the financial sector reforms. The banking sector had earlier undergone similar reforms. For transparency, the insurance companies were required to lodge funds generated during the process in escrow accounts at the Central Bank. Though the exercise had lapsed several months ago, the controversies that arose had led to delays in allowing the companies access to funds they mobilised, as government sought to authenticate the process.
With the funds now being released, the insurance sector in Nigeria, generally believed to have grossly underachieved in the past partly due to a weak capital base, looks poised now to stamp its presence in the financial services sector. Investors have clearly begun to respond positively to this prospect, as the hitherto 'penny' stocks in the sector are receiving heightened market interest. Insurance sector stocks are now among the most patronised in daily stock market trading, especially since the announcement of the fund release approval.
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