Insurers return to trenches as NAICOM unveils N15bn capital on ‘A’ list firms

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Insurers return to trenches as NAICOM unveils N15bn capital on ‘A’ list firms
AlhajiMuhammed Kari, Commissioner for Insurance, National Insurance Commission (NAICOM).

Authorities at the National Insurance Commission (NAICOM) on Wednesday sounded the gong for a fresh round of recapitalisation of insurance companies in Nigeria.

Under the new recapitalization structure which is to come into effect January 1, 2019, the top echelon of insurance firms would be required to put in place a minimum solvency capital of N15bn for them to remain in operation.

NAICOM said that the restructuring of the minimum solvency capital base requirement of insurance companies became necessary in order to ensure that insurance companies are made to become stronger and more vibrant.

The insurance regulatory body said that the new regime of recapitalization would be in three categories. The three tier recapitalization arrangement the commission said will open fresh window for the licencing of new insurance companies. The last batch of insurance companies to be licenced by NAICOM was conducted 10 years ago.

Commissioner for Insurance Alhaji Mohammed Kari who spoke to news men in Lagos Wednesday after a closed door meeting with chief executives of insurance companies at Four Point by Sheraton Hotel in Victoria Island said that the new capital structure would usher in the much talked about risk based supervision where companies would allow their capital to determine their risk portfolios.

Under the new tier based minimum capital solvency arrangement, the tier three companies would be allowed to continue in business with their existing capital requirement of N2bn for life companies and N3bn for non life with such companies been restricted to individual life, health and miscellaneous insurance for life underwriters and fire, motor, general accident and the compulsory engineering classes of businesses for the non life firms.

The tier two based composite insurance firms which currently operates with a capital of N5bn would be required to hike their minimum capital subsisting requirement by 50 per cent to enable it underwrite all tier three businesses in addition to all classes of engineering, marine, bonds and suretyship which translates to minimum capital solvency of N7.5bn.The top echelon of the industry which would play in the tier one group will need a capital base of N15bn which amounts to a 200 per cent increase over the subsisting N5bn capital. Such companies would be allowed to handle all classes of businesses in tier three and tier two in addition to oil and gas and aviation insurance.

“The recapitalization scheme is aimed at developing and applying appropriate tools that consider the nature, scale and complexity of insurers as well as non core activities of insurance groups, to limit significantly systemic risk and thereby achieve soundness of insurance companies and contribute to the achievement of stability of the financial system, the Deputy Commissioner for Insurance, Technical Mr. Sunday Thomas who represented the commissioner for insurance had noted.

According to him, the novelty of the risk base capitalisation is that it will not lead to the cancellation of any companys licence or compulsory injection of fresh funds as companies would be allowed to determine the level and scope of their operations based on available funds. The categorisation of companies under the three tier arrangement would be based on their 2017 financial statements
”Subsequently, request for change of tier level shall be subject to the filing of an application and approval by NAICOM on satisfactory fulfillment of set conditions”, he submitted.

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