Share capital of insurance companies: compliance with CIMA standards
As a reminder, the Council of Ministers, in charge of insurance, called in 2016 the State-owned insurance companies to increase their share capital of 1 billion FCFA (1.7 million USD) to 5 billion of FCFA (8.6 million USD) and the mutual insurance companies from 800 FCFA million (1.3 million USD) to 3 billion FCFA (5.2 million USD).
The objective of this decision is to reinforce the financial strength of insurance companies, reduce the risk of bankruptcy and encourage consolidation in the sector.
The first phase of the increase program sets the minimum capital to 3 billion FCFA (5.2 million USD) for limited companies and 2 billion FCFA (3.4 million USD) for mutuals. The project also requires additional shareholder's equity equal to or higher than 80% of the share capital. The deadline for this first step expires on 31 May 2019.
In a second phase, the minimum capital will be increased to 5 billion FCFA for the limited companies and 3 billion FCFA for the mutuals.
However, the project is being implemented slowly. This is illustrated by the small number of consolidation operations observed in the zone. The CIMA counts at the end of July 2018, 180 insurance companies, 87 of which only are compliant with regulatory requirements, according to the agency Ecofin.
For the CIMA, there are two main reasons for this delay: insurers are having difficulties to find local shareholders willing to enter their capital and the low profitability of the activity that keeps foreign investors away.
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