Concrete plans are currently underway to increase the capital base of microinsurance and takaful insurance companies in the country, even as, the total gross premium for microinsurance and takaful insurance sub sector rose to N2.3 billion in their 2019 financial year, LEADERSHIP can exclusively reveal.
Takaful and Microinsurance firms were still operating with the same capital base which the legal frameworks of the two concept prescribed for them in 2013, the threshold that seems inadequate now, considering inflation, forex volatility, among other economic parameters.
Insider source disclosed to LEADERSHIP that the National Insurance Commission (NAICOM) is currently reviewing the microinsurance and Takaful Insurance guidelines and are planning stakeholders’ engagement before the revised guidelines are released to the public.
Currently, the capital base for a National Insurer, who seek composite micro-insurance licence, is expected to be capitalised to the tune of N600 million, while N400 million minimum capital base is needed from a general micro-insurance and N200 million for Life operations. For a state microinsurer, the minimum capital base is pegged at NI00 million, broken into N60 million for general and N40 million for life operators.
The two concepts are expected to increase insurance penetration by ensuring that more than 60 million Nigerians have one form of insurance or the other.
Findings revealed that composite microinsurance firms may have their capital increased to over N1 billion, while general microinsurance firms could be capitalised to the tune of N800 million or more.
Already, there are four microinsurance companies and five takaful operators in Nigeria, while several applications are already with NAICOM for consideration, it was learnt.
Corroborating our findings, the commissioner for Insurance, Mr Sunday Thomas, earlier disclosed that the amount of capital required for micro-insurance underwriting with respect to some of the sectors is looking unrealistic and that NAICOM may have to step in.
“Micro-insurance is one of the areas we want to fast track the process. We have a couple of applications that we should be able to conclude soon. For us, micro-insurance in financial inclusion generally is the way to go. Financial inclusion is going to help us and it is going to drive penetration. I believe that with the way we are going about it, things will get better,” he pointed out.
“We are trying to rejig the entire guideline to be more realistic. What we had in the guideline issued about six years ago was the National, State and the Unit licensing of micro-insurance companies. The amount of capital required for this with respect to some of the sectors is looking unrealistic and we may have to tinker with it,” he said.
He noted that the capital looked adequate as at the time it was conceptualised in 2013 but obviously it is no longer adequate at the moment, stressing that, the exchange rate was about N160 to a dollar when the business was conceptualised and now it has tripled that amount.
Meanwhile, Takaful and Microinsurance companies contributed a gross premium of N2.3 billion as at the end of 31 December 2019 with N650 million paid as clams during the year.
The breakdown shows that Takaful insurance companies generated a total of N2 billion while Microinsurance companies generated N350 million in the same year of 2019.
Speaking on this development, the head, Takaful, NAICOM, Mr Zubairu Darazo, said the claims paid by Takaful insurance companies stood at N540 million while that of Microinsurance stood at N75 million.
The claims ratio for Takaful Insurance, he stressed, stood at 27 per cent while that of Microinsurance was 21.5 per cent, bringing the total Claims ratio of both businesses to 24.25 per cent as at the end of 31 December, 2019.
He identified lack of proper understanding of both concepts by the operators and consumers, poor public awareness and lack of skilled manpower as some of the challenges of their operations.
The commission, he stated, plans to hold a number of stakeholder engagements, workshops and sensitisation programmes in 2021 in pursuit of its financial inclusion strategy which is achieved when all adult population have easy access to a broad range of formal financial services that meet their needs at affordable cost.
With the engagement, the commission projected positive outlook for both Takaful and Microinsurance going forward.