Business
Nothing ‘ll stop us from implementing recapitalization policy – NAICOM
The National Insurance Commission (NAICOM) has said no legal action will stop it from embarking on regulations aimed at protecting investors in the insurance industry.
Recall that Justice Muslim Hassan, of the Federal High Court sitting in Lagos, recently ordered NAICOM to stop the implementation of the proposed minimum solvency capital policy scheduled to kick-start pending the expiration of a 30-day pre-action notice.
Under the new Tier-Based Minimum Solvency Requirement (TBMSR), the minimum capital requirement (policyholders’ surplus/shareholders’ funds) for insurance companies remains as the base Tier 3 capital (N3 billion for General Insurance; N2 billion for Life).
Tier 3 companies are now only able to write retail insurances (micro insurance, motor, fire, agriculture, compulsory liability insurances, individual life, health and miscellaneous insurance).
Tier 2 companies are required to have 150% of the base capital (N4.5 billion for General Insurance and N3 billion for Life) based on the types of risks written. Tier 2 companies can write retail insurance as prescribed under Tier 1, including commercial and industrial risks and group life assurance.
Tier 1 companies are ultimately required to have 300% of the base capital (N9 billion for General Insurance and N6 billion for Life) to write all risks including annuity and exclusively Special Risks (e.g. energy and aviation risks) which are highly capital intensive in terms of risks retained on the balance sheet of the insurer in addition to any reinsurance capital purchased.
Automatically, composite companies (Life and General Insurance) at any tier only need add both sides to make up the required capital, that is N5 billion for Tier 3, N7.5 billion for Tier 2 and N15 billion for Tier 1.
Reacting to the court order, NAICOM said it is yet to be served any court order restraining it from carrying out the ongoing Tier Based Minimum Solvency Capital policy in the industry.
Mohammed Kari, commissioner for Insurance lamented that it has been in the character of insurance companies to resist recapitalisation whenever it is introduced, stating that this was the reason the sector refuse to grow.
He noted that investors in the insurance sectors that have been denied dividend over a long time are happy with the policy.
