By ZAKA ABD-KHALIQ, Lagos
The Commissioner for Insurance, National Insurance Commission (NAICOM), Alhaji Mohammed Kari, has said that the ongoing recapitalisation exercise will allow local insurers to retain huge risks in the country.
This, according to him, was to avoid premium flight, which will, in the long run, increase the profitability of the sector and its impact on the nation’s economic growth and development.
Speaking with journalists at the just concluded 46th AIO in Johannesburg, South Africa, he noted that, Nigerian Insurers must be responsible in meeting and surpassing customers’ expectation in the area of product delivery and prompt claims payment, saying, the low risk retention capacity of the sector would be addressed with the current recapitalisation exercise.
While stating that the recapitalisation is long overdue as foreign exchange rate, asset replacement values as well as claims volume have increased in the last 12 years, he added that, operating with the current capital base is putting insurance firms at risk.
He said, insurance operators are fond of resisting recapitalisation exercise, whenever the idea is mooted, saying, some insurers prefer to continue to write huge risks in aviation and marine sectors, with small capital, a development, he said, was responsible for why some underwriting firms are struggling to pay claims.
On whether there is the need for recapitalisation exercise at a time the country is transiting to Risk Based Supervision(RBS), he said, there is no insurance industry all over the world that do not have minimum capital requirement, which is usually, the entry point.
“All over the world, there is usually, an entry point, which is the minimum capital requirement for an insurer to underwrite risk in a country. Other decisions whether to increase the minimum capital or maintain it, is taken thereafter. So, even under risk based, the minimum capital still exists,” he said.
NAICOM, had, in a circular released on 20th of May, 2019 and signed by the director, Policy and Regulation Directorate of NAICOM, Mr. Pius Agboola, existing insurance companies now have till June 30, 2020 to recapitalise, while a new insurance firm will need to meet up the new capitalisation before it is issued a license to transact insurance business in the country.
According to the circular, “In 2005/2007, insurance industry witnessed its last recapitalisation and despite the astronomical increase in value of insured assets, consequent exposure to higher level of insured liabilities and operating cost of insurers, the same capital continued to rule in the insurance industry.”
The minimum paid-up share capital requirement of insurance and reinsurance companies in Nigeria, NAICOM said, is now reviewed in the exercise of the power conferred on it by enabling laws.
Stating that the circular only applies to insurance and reinsurance companies, with the exemption of Takaful operators and micro insurance companies, it added that the new minimum paid-up share capital requirement shall take effect from May 20, 2019, for new application, while existing insurers and reinsurers shall be required to fully comply not later than June 30, 2020.
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