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NAICOM orders insurance companies to recaptalise by 400%

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Effective yesterday, May 20, 2019, the minimum paid-up share capital of a Life, Non-Life and Composite insurance companies, including re-insurance companies has been increased to N8 billion, N10 billion, N18 billion and N20 billion respectively, from N2 billion, N3 billion, N5 billion and N10??, the Nation investigation has revealed.

This new capital injection requirement is an increase of 400 per cent, 333.33 per cent, 360 per cent and 200 per cent respectively, from the previous capital.

The newspaper cited a circular issued by the National Insurance Commission (NAICOM), dated May 20, 2019 to Chief Executive Officers and Managing Directors of insurance companies to this effect.

According to the circular, the companies are required to fully comply not later than June 30, 2020.

The circular also stated policy applies to all insurance and reinsurance companies except Takaful and micro insurance companies.

The newspaper learnt that any company that fail to meet up with the new requirement by June 30, would cease to exist.

Insider sources in the industry disclosed that the new recapitalization order is different from the Tier Based Solvency Capital Recapitalization introduced by the regulator in July, 2018 and rejected by operators and shareholders.

A source said the regulator seems to have gotten it right now by following the law which allows them to order recapitalization.

He posited that the tier based plan that was introduced last year was not backed by law, reason why some operators and shareholders could revolt against the commission.

The Nation on Monday reported that there was an uneasy calm between the NAICOM and operators following the recent cancellation of some regulatory policies, leaving the industry with no new direction.

The policies were meant to help the regulator shape the industry’s performance.

NAICOM on July 25, 2018, introduced the Tier-Based Minimum Solvency Capital (TBMSC) that would have made companies recapitalize in order to have a good ranking under the Tier 1, 2 and 3 categories of the TBMSC plan. The plan was later cancelled in November by the regulator.

The Commissioner for Insurance, Mohammed Kari said the recapitalization scheme was aimed at developing and applying appropriate tools that consider the nature, scale and complexity of insurers, as well as non-core activities of insurance groups, to limit significant system risk and thereby achieve soundness of companies and contribute to the achievement of stability of the financial system.

NAICOM said the policy would allow insurers to focus on their areas of strength; improve settlement of claims; enhance local retention; encourage market discipline, prudence and appropriate pricing; encourage innovation and deepen market penetration; encourage voluntary mergers, and build investors’ confidence; and build a stronger and more vibrant insurance industry.

But some insurers through their shareholders kicked against it, leading to the cancellation of the policy by NAICOM.

In the same vein, the commission introduced the State Insurance Producers (SIP) policy which would have granted States in the country operational license to sell insurance products.

The policy seeks to enforce compulsory insurance and deepen penetration and create jobs. But the policy guideline pitched the brokers against the Commission. The move has sent jitters down the spine of operators especially brokers, who fear that the addition of states as insurance intermediaries might throw them out of business.

Based on this, the brokers threatened to sue the commission, leading to the cancellation of the policy.

Following these cancellations, the industry has been at a standstill, anxiously waiting for the next move by the regulator.

of a Life, General and Composite insurance companies, including re-insurance companies has been increased to N8 billion,

9–(1) No insurer shall carry on insurance business in Nigeria unless

the insurer has and maintained, while carrying on that business, a paid-up share

capital of the following amounts as the case may require, in the case of-

(a) life insurance business, not less than N150,000,000 ;

(b) general insurance, not less than N200,000,000 ;

(c) composite insurance business, not less than N350,000,000 ; or

(d) reinsurance business, not less than N350,000,000

(2) The paid-up share capital stipulated in subsection (1) of this section

in the case of existing insurer-

(a) shall come into force on the expiration of a period of 9 months

from the date of commencement of this Act; and

(b) may be subscribed to by the capitalization of undistributed profits

as approved by the Commission.

(3) The Commission shall-

(a) cancel the registration of any insurer or reinsurer that fails to satisfy

the provisions of subsections (1) of this section as it relates to the category of

Operation of such insurer or reinsurer ; and

(b) not later than 30 days after expiry of the period specified in

subsection (2) of this section publish a list of all insurers and reinsures that

have complied with the provisions of this section.

(4) The Commission may increase from time to time the amount of

minimum paid – up share capital stated in subsection (1).

10.-(1) An insurer intending to commence insurance business in Nigeria

after the commencement of this Act shall deposit the equivalent of 50 per cent

of the paid-up share capital referred to in section 9 of

this Act (in this Act referred to as the “Statutory Deposit”)

with the Central Bank.

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