New investments in retail will unlock insurance sector potential – Chike Mokwunye

Royal Exchange plc last week interacted with management of the Nigeria Stock Exchange, reflecting on successes of the Exchange, challenge of investors and way forward. Chike Mokwunye, GMD, Royal Exchange after the ‘Gong Sounding’ to mark end-of trading of that day spoke with Modestus Anaesoronye on future of the Nigerian insurance industry. Excerpts:

Your Company Royal Exchange just visited the Nigerian Stock Exchange (NSE), why the visit?

We have come to the Stock Exchange basically to participate in the gong sounding ritual to mark close of trading for the day. We have also interacted with management of the Stock Exchange for better relationship, understanding and also share views on challenges of the insurance industry, a major sub-sector of the financial services market.

The ritual of ‘Gong Sounding’ at the Exchange is of great significance, why do you think Royal Exchange was chosen for this exercise?

I don’t know why the Exchange decided to invite us for this exercise, but for us it’s a privilege and honour bearing in mind that we are actually the mother of insurance Companies in Nigeria having started business in 1918. We have also been part of the Stock Exchange since 1990. So, for us it is an honour and an opportunity to interact with people on the floor. We understand that the insurance sub-sector where we operate have been having a lot of challenges on prices of their stock. This sector, which accounts for over 90 percent of our income have most of their stocks trade at nominal value, so there is need for us to get more closer to people at the Stock Exchange to see how we can improve on our relationship with the market.

You have benefited from the market before now, on raising of capital. It looks like that opportunity is drying up in the market, what is your take on this?

I do not really think that the opportunity is dried up. The opportunities are still there. Funds can still be raised. Yes, there is mass apathy where you find that a lot of people are no longer interested in investing in stocks, but you can still raise funds through private placement as well as other windows. There are opportunities and many companies have done that successfully.

Having interacted with the Exchange, what would be your advice on how to improve the market?

The NSE and the Securities & Exchange Commission (SEC) would have to design strategies to restore confidence among individual investors. It’s very necessary because that is what is required to build capacity for the market. Nigerian capital market is always talking about foreign investors accounting for 60 percent the market, but we have seen that it is more or less like ‘hot money’ such that when the market is good they come in droves and when the market gets bad all of them will go. So, there is need for us to see what we can do to raise interest from within and amongs Nigerians both institutional and individual investors. The insurance segment has been traditionally a major institutional investor in the capital market, but their confidence was shaken because of 2008 market crash and they kind of losses they suffered. It is necessary that the Exchange and SEC work together to restore that confidence.

If you are in position to advice the stock brokers, what would you be telling them about insurance companies?
The potential in the insurance sector is great. In fact, insurance is actually the bulwark of most economies and would become the bulwark of the Nigerian economy in no distant time. The penetration of insurance is just about 0.3 percent of the GDP, compared to the population of about 170 million people in Nigeria. From the point of view of compulsory insurances, it favours development of insurance business. But for this to happen, government must show interest in the enforcement of these insurances. A lot of insurance companies are investing heavily in trying to deepen the market through retail insurance products, and i am optimistic that in the next five years the insurance sector potential will be unlocked.

If you are meeting someone for the first time, what would you be telling the person about Royal Exchange and its capacity in the market?
This is a company you can trust and all the activities of the company are sustainable, that i can assure you.