Implementation of the proposed minimum solvency capital police for the insurance sector scheduled to start from September 14, 2018, pending the expiration of a 30-day pre-action notice has suffered a setback following a court order that put the action on hold.
Justice Muslim Hassan in a class action brought by some shareholders of insurance companies in Nigeria, challenging the new minimum capital requirement ordered the National Insurance Commission (NAICOM) to put a hold on the implementation of the new policy.
Recall that some Chief Executives of insurance companies that fall within the tier two and tier three categories had instituted a court action against NAICOM in court.
Tier one is the highest capital base for each class. Tier three is the minimum capital base required for each class.
Life insurance firms now have three capitalization tiers. Tier one companies will be required to have N6 billion as capital. Tier two life insurance firms will be required to have N3 billion, while tier 3 firms will maintain the current requirements of N2 billion.
Non-life insurance firms will now have three tiers. Tier one non-life firms are mandated to have a capital base of N9 billion. Tier two firms in this segment are expected to have a capital base of N4.5 billion, while tier 3 firms will maintain the current capital base of N3 billion.
Insurance companies operating in the composite segment, that is all classes of insurance now have three tiers. Companies operating in the tier one will be required to have a capital base of N15 billion. Tier two firms will need to have a capital base of N7.5 billion, while those in tier 3 will maintain the current capital base of N5 billion.
The last increase in capital base was in 2005 when NAICOM increased the capital base from N150 million to N2 billion for operators in the life insurance segment, N200 million to N3 billion for non-life, and composite insurance firms from N350 million to N5 billion.