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Recapitalisation: NAICOM requests plan from insurers

Recapitalisation: NAICOM requests plan from insurers

National Insurance Commission (NAICOM) has taken a step further in its recapitalization policy issuing another circular to insurance and reinsurance companies calling on them to submit their recapitalization plans on or before August 20, 2019.

The latest Circular with reference NAICOM/DPR/CIR/25-02/2019, dated July 23, signed by Director, Policy and Regulation Directorate, Mr. Pius Agboola and addressed to all insurance and reinsurance companies is a follow up to its circular referenced NAICOM/DPR/CIR/25-01/2019, dated May 20, 2019, which mandated insurance and reinsurance companies to increase their minimum paid up capital.

The new regime introduced in the industry by NAICOM on May 20, 2019, mandates Life Insurance companies to raise their capital from N2 billion to N8 billion; general business operators from N3 billion to N10 billion; composite business, N5 billion to N18 billion and reinsurance from N10 billion to N20 billion.

NAICOM, in a circular entitled; “Re: Minimum Paid Up Share Capital Policy for Insurance and Reinsurance Companies,” stated that the recapitalisation plan should include among others; capital status of the companies as at the last audited financial statements; board resolution on how to comply with the directives; detailed action plan on how the funds for the recapitalisation are to be sourced with timeline and deliverables.

It also asked companies intending to seek funds from the capital market to submit their plan of action on a file-and-use basis and companies that intend to merge or acquire another should submit their proposal after which they must comply with Section 30 and 31 of the Insurance Act 2003.

The regulator noted that after the submission is made, it shall review and provide response on the submitted plans on or before September 17, 2019, adding that the review may require meeting the board and management of each of the insurance company on its recapitalisation plan.

The insurance industry regulator said it is engaging other regulatory bodies for possible palliatives in additional to those it is has considered.

NAICOM explained that in furtherance to the circular dated May 20, 2019, the minimum paid up share capital shall be through any or a combination of the following; existing paid up share capital; cash payment for new shares issued; retained earnings – capitalisation of undistributed profit; payment in kind (other than by way of cash) for new shares issues such as properties; treasury bills; shares; bond which must be converted to cash not later than three months to the deadline for recapitalisation and share premium. NAICOM added that the items listed above can be achieved through merger and acquisition.

NAICOM said cash payment for new shares issued shall be deposited in the escrow account with the Central Bank of Nigeria (CBN), adding that deposited funds shall be released not later than 30 days after confirmation and issuance of a new licence.

The commission posited that the shareholders’ fund as at the last date of recapitalisation for existing insurance/reinsurance companies shall not be less than the required minimum paid-up share capital.

The regulator also stated that payment of statutory deposit shall be in accordance with the Insurance Act 2003 and shall be made not later than 30 days to the deadline for the recapitalisation, stressing that all mergers and acquisitions shall be concluded not later than 60 days to the deadline for the recapitalisation.

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