Major Shake-Up Expected In Insurance Sector as CEOs And EDs Face Imminent Exit Due To Tenure Limit Policy

From January 2024, many Chief Executive Officers (CEOs) and Executive Directors (EDs) who have spent more than the stipulated period of between 10 to 15 years in insurance and reinsurance companies are expected to go, findings by The Nation have shown.

With four months left until the end of the affected CEOs’ and EDs’ tenure, there is disquiet and palpable fear in the sector following the implementation moves by the regulator in compliance with Corporate Governance Code and Guidelines.

If the National Insurance Commission (NAICOM) enforces the guideline in November, over 90 per cent of Chief Executive Officers/Managing Directors of insurance companies will be forced to quit their exalted positions.

The policy is expected to bring fresh ideas from a new set of CEOs and EDs to improve the companies’ performances.

The policy of tenure limit will streamline things in the sector, including company performance, the newspaper learnt.

NAICOM, in a circular numbered NAICOM/DPR/CIR/45/2022 sent to insurance and reinsurance companies on November 22 of last year, stated that CEOs and EDs’ tenure limit would become effective from January 1, this year, with a transition period of 12 months.

The first set of MDs/CEOs to be affected are Biyi Otegbeye of Regency Alliance Insurance; Ganiyu Musa of Cornerstone Insurance; Fatai Lawal of Sterling Assurance; Eddie Efekoha of Consolidated Hallmark Insurance; Tope Smart of NEM Insurance; Tunde Hassan-Odukale of Leadway Assurance; Bola Odukale of Capital Express Assurance; and Peju Osipitan of Great Nigeria Insurance. These CEOs are mostly owner-managers.

Those affected at EDs’ level are Adetola Adegbaye of Leadway Assurance; and Jide Akingbade of Sterling Assurance.

Others that would exit the companies in 2024 are mostly CEOs who were EDs before their appointments as a CEO. They served up to 10 years and transitioned from EDs to CEOs and have served a cumulative 15 years in both positions in the same company.

A top source, who spoke with the newspaper, said some CEOs were working against the policy as they do not want the commission to enforce it.

He hinted that “some of them want us to take down the policy while others have said it is what the industry needs”.

He pointed out that the policy is one, among others, that some of the CEOs have tried to shut down with the most popular being recapitalisation.

He further said a lot of things were going on behind the scenes because many of them do not want to leave.

“At present, they are putting pressure on the regulator not to enforce the policy. They are scrambling not to go. But the Commission seems adamant and would not go back on the policy. The feelers that we get from NAICOM is that the time has not come for them to step in. They said when it is time for them to enforce it, they will do so. We believe NAICOM will do the needful and some are going to exit by the end of the year.

“Yes, it will sweep many of them away, but we should look at it this way: If the Central Bank of Nigeria (CBN) did not come up with its tenure limit that took the likes of Jim Ovia, Tony Elumelu and Aig Imoukhuede out from their companies as MD, do you think they would have been able to break into the kind of businesses they broke into when they were in the bank? The answer is no. But look at what they have become outside the bank and it is not as if they are completely out of the bank system.

“Why don’t they think that such can also happen in the insurance sector where the CEOs will find themselves venturing into other areas and making success out of them and allow another phase of growth in the sector such that whoever succeeds them will know he or she must vacate the seat in the next 10 years and the succession plan will be instituted.

“We are seeing it happen already. For example, Mr. Oye Hassan-Odukale left as CEO of Leadway. He is doing very well in the areas he has ventured into which he couldn’t do when he was at Leadway. This is growth. The CEOs should see things in this perspective rather than put pressure on the regulator to maintain the status quo,” he said.

In a report by Ndentuokid Essang of AELEX, a leading Commercial & Dispute Resolution law firm in West Africa with offices in Lagos, Port Harcourt, Abuja, and Accra, Ghana, it was stated that EDs who have served up to 10 years or CEOs who transitioned from ED positions to that of CEO and have served a cumulative 15 years in both positions in the same company would be required to vacate their office at the expiration of 12 months from the effective date of the circular.

The report entitled “Nigeria: Examining NAICOM’s Circular on Tenure Limit for Executive Directors and its Implications for the insurance industry” reads: “Pursuant to the powers conferred on the National Insurance Commission by the National Insurance Commission Act 1997 (the NAICOM Act), and in line with the Nigerian Code of Corporate Governance 2018 (the NCCG, 2018), the Commission issued a circular dated 22nd November 2022 entitled: Tenure Limit for Executive Directors of insurance and reinsurance companies.

“By the circular, the NAICOM introduces tenure limits for Executive Directors (EDs) of Insurance and Reinsurance Companies in Nigeria with effect from January 1, 2023, and enjoins insurance and reinsurance companies to give consideration to the provisions of the circular in their future engagement of Chief Executive Officers (CEOs) and EDs.”

Tenure of EDs

“The circular stipulates that CEOs and other EDs of insurance and reinsurance companies shall serve a maximum tenure of 10 years comprising of two terms of five years each, subject to a single approval of the Commission.

“Furthermore, the circular provides that an ED, who becomes a CEO in the same company, shall serve a cumulative tenure not exceeding 15 years.

“In addition, the circular provides that where an ED changes portfolio by moving to another position of ED equivalent within the same company, the period spent in the previous company as ED will count for the purpose of determining the maximum tenure of the said ED.

“In respect of insurance companies that are a product of a merger, acquisition, takeover or any other combination, the 10-year period shall include the pre- and post-combination service years as a CEO or as ED. The circular also stipulates that there shall be a transitional period of 12 months from the effective date of the circular in respect of existing appointments and that CEOs and EDs who have served for 10 years shall cease to continue in such capacity, after the transition period of 12 months.

Effect of circular

“The implication of the stipulations in the circular is that effective from January 1, 2022, the tenure of CEOs and EDs of insurance and reinsurance companies will be limited to a maximum of 10 years, except where an ED transits into the position of a CEO in the same company in which case it shall be a cumulative period of 15 years.

“Further to the above, EDs who have served up to 10 years as such or CEOs who transition