l they are capable of securing their livelihood.
In spite of Nigerian growing population still Nigeria was left behind when it comes to insurance. The global insurance market ranking shows that, the current Nigeria position in global insurance market was 64th and 4th in Africa with market capitalization of about N200bn ($1.62bn).
In many of the African countries like Nigeria and other developing countries insurance is less than 100 years old, and it was just of recent that the reinsurance practice of reinsurance started to be taken so serious.
The first insurance company to have a full branch office in Nigeria was the Royal Exchange Assurance (REA) of London in 1923. Before then, insurance companies which were mainly British, only had agencies. Many of the insurance companies in these days are foreign companies usually based in Europe who’s only write insurance through its individual agents in the country.
African reinsurance corporation was established in 1976 and the agreement establishing the African reinsurance corporation which commenced in 1978, Nigeria as a “member state shall undertake to guarantee” upon the entry into force of this agreement, that all insurance and reinsurance establishments operating in its territory shall offer to place with the corporation a minimum of five percent of each of their reinsurance treaties, both present and future including life treaties at terms accorded to most favored reinsurances (Chapter vi, Article 27: Forms of Cession).
J. O. Irukwu in his publication (1981) stated that “all the insurance companies operating in Nigeria are required by law to cede twenty percent of their business by way of legal cessions to the Nigerian Reinsurance Corporation. The present legislation governing the insurance operations in Nigeria is the Insurance Decree which came into force on the first of December, 1976”. He further argued that the insurance industry in Nigeria will grow tremendously in the future.
L. P. Boul (1977) reported that “Nigeria as of then enjoyed a well managed, reputable market internationally. In fact, it was the largest insurance market in Africa, with an annual premium income of N250, 000,000 according to 1976 estimates” but now it increase to over NGN 716,000,000 according to sigma report 2006.
Evidence had now shown that Insurance premium rose to 25% in 2008 and perhaps 30% in 2009. It was also expected to rise to NGN 6,000bn ($45bn) by 2020, but in the meantime, Nigerian government is expecting the insurance premium growth of NGN1,100bn ($8.36bn) before the end of 2012.
The recent capital base set by the Government of Nigeria for the life insurance was NGN2.5bn and NGN3bn for general insurance companies as their minimum paid-up capital with increase of over 1200% increase, while reinsurance companies were required to increase their minimum paid up capital to NGN10 billion. Although this suppose to be seen as an opportunity that could enable local players to compete internationally but remains a critical decisions for many business owner. (Bashorun, 2003; Ladipo-Ajayi, 2005).
This issue of recapitalization drivers many insurance companies in Nigeria to adopted merger and acquisition in order to meet the required target, after the M&A 71 strong companies emerged. This process of recapitalization was
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