Fresh recapitalisation exercise is brewing in insurance industry as there is an ongoing plans to increase the current capitalisation of underwriting firms in the country.
Currently, insurance sector operates on a capitalisation of N2billion, N3billion, N5billion and 10billion for life, general, composite insurance and Reinsurance licenses respectively.
Already, the process to initiate the new capital has begun as the Consolidated Insurance Bill which prescribed the fresh capital has reached an advanced stage of being passed into law by the National Assembly.
LEADERSHIP findings show that a fresh capitalisation of N8 billion; N10billion and N18 billion have been imprinted into the Consolidated Insurance bill before the National Assembly, and its expected to take effect as soon as the house pass it into law.
Although, the capital benchmark is similar to the already botched recapitalisation exercise, but the upcoming one is going to be risk based, meaning that, your level of risk appetite determines your level of capitalisation, even though, N8 billion, N10 billion and N18 billion will be the minimum capital requirement.
This development has, however, raised the minimum paid-up share capital of a Life insurance company from N2 billion to N8 billion; Non-Life insurance from N3 billion to N10 billion and Composite insurance from N5 billion to N18 billion even as reinsurance companies will now be required to raise their capital base from N10 billion to N20 billion.
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According to the bill prescribing a new capital, “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; not less than N8 billion for life insurance business; non-life insurance, not less than N10 billion and reinsurance business, not less than N20 billion.
“The paid-up share capital stipulated in subsection (1) of this section in the case of existing insurer shall come into force on the expiration of a period of 9 months from the date of commencement of this Bill.”
Corroborating further on this development at a seminar for Insurance journalists in Lagos at the weekend, the director of supervision, the National Insurance Commission(NAICOM), Mr. Barineka Thompson said, the commission is awaiting the passage of the bill into law to empower the regulator to determine the solvency capital for insurance companies. He added that, though, going forward, the industry would be operating on risk based supervision and capital, there would still be a minimum capital requirement.
Similarly, the commissioner for insurance/CEO, NAICOM, Mr. Sunday Thomas, said, the commission is working assiduously with the National Assembly to ensure that the consolidated insurance bills is passed into law, adding that, he, alongside other directors of the commission will, this week, engage the House committee on Insurance and Actuarial Matter to look at the bill draft emanating from the recently held public hearing on the bill.
“ We will have engagement with the National Assembly to look at the insurance bill draft. The committee is currently working on harmonising the stakeholders’ views to ensure the industry have a wholistic document by the time the bill becomes law and we are working closely with them on this,” he pointed out.
He added that the industry, going forward, will commence implementation of the IFRS 17 under the Risk Based Supervision in the next one to two months as staff of the commission have been trained on this.
Earlier, the chairman, Nigerian Insurance Association(NIA), Mr. Ganiyu Musa, had said, the operators support proper recapitalisation of underwriting firms, stating that, the controversy surrounding the previous botched recapitalisation exercise was because the current insurance legislation is outdated and made it impossible to do the sought of things that needed to be done in terms of the proper definition of capital.
Musa, who is also the group managing director/CEO of Cornerstone Insurance Plc, said: “to this end, we are working with the national assembly to modernise the primary insurance legislations. Again, you are aware of the Consolidated insurance Bill in which we have been working with NAICOM to ensure that the final law that comes out, provide the basis for our legislation to be able to respond to the legislative environment of the 21st century.”
Explaining the state of the bill, he disclosed that the bill has gone through the second reading and there had been public hearing on it. “But because the process of law making is cumbersome, it may take some time. Apart from just operators, regulators and the brokers, there are a number of other stakeholders that came in for the public hearing and did their own presentations. So, now the committee in charge at the National Assembly is going through the process of reconciling all the points made by relevant stakeholders and hopefully, we will be able to get it to the floor of the National Assembly for passage into law soon,” he pointed out.
Meanwhile, NAICOM said it has issued five licenses to four insurance and one re-insurance companies as part of measures to depending insurance penetration in the country.
Commissioner for Insurance, Sunday Thomas, who stated this at a seminar organised for insurance correspondents in Lagos at the weekend, said, his administration was taking measures to block all the leakages in sector, adding that, “what this means is that, not just life and non life operations is expected to grow. We are taking financial inclusion policy very seriously. Two Takaful companies have been licenses and two micro insurance companies have been licensed and two are in the process of being licensed.”
Thomas acknowledged the importance of financial inclusion to the success of the insurance sector. He said the commission was already engaging states and enlighten them on the benefits of insurance and by that, expand insurance adoption and penetration in the country.
The commissioner said the first set of risk based supervision in Nigeria will take off in the next two months. He said the relevant people have been trained and instruments have been acquired.
Thomas also stressed that, effective from June 1, 2021, corporate governance guideline is in effect in order to protect investment.