The new recapitalisation exercise brewing in the insurance industry is expected to triple the current capacity of underwriters across the country from the present paid-up capital of N2 billion, N3 billion, N5 billion, and N10 billion for life, general, composite insurance, and reinsurance licenses respectively, The Guardian has learnt.
Already, the process to begin the new capitalization exercise 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.
Findings by The Guardian revealed that a fresh capitalisation value of N8 billion; N10 billion and N18 billion has been marked into the Consolidated Insurance Bill before the National Assembly, and it is expected to take effect as soon as the house passes it into law.
Although, the capital benchmark is similar to the already failed recapitalisation exercise, the upcoming one is going to be risk-based, meaning that, operators’ level of risk appetite determines the 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.
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 the existing insurer shall come into force on the expiration of a period of nine months from the date of commencement of this Bill.”
Commenting on the development, in Lagos at a workshop, the Director, Supervision, the National Insurance Commission (NAICOM), 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.
Thompson, stressed, 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/Chief Executive Officer, NAICOM, Sunday Thomas, said the commission is working with the National Assembly to ensure that the bills are 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 draft bill emanating from the recently held public hearing on the bill.
“We will engage 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 has a holistic 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 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), Ganiyu Musa, had said, the operators support the 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/Chief Executive Officer, 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 bill in which we have been working with NAICOM to ensure that the final law that comes out, provides 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 said that the bill has gone through the second reading and there had been a public hearing on it. “But because the process of law-making is cumbersome, it may take some time. Apart from just operators, regulators and 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.x
Meanwhile, NAICOM said it has issued five licenses to four insurance and one re-insurance companies as part of measures to deepen insurance penetration in the country.
The Commissioner said his administration was taking measures to block all the leakages in the sector, adding that, “what this means is that, not just life and non-life operations are expected to grow. We are taking the financial inclusion policy very seriously. Two Takaful companies have been licensed and two microinsurance 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 enlightening them on the benefits of insurance in order to expand insurance adoption and penetration in the country.