Matthew Otoijagha
Chief executives of insurance companies have held an emergency meeting over some requirements in the new recapitalisation circular issued to the underwriters by the National Insurance Commission.
It was learnt that the underwriters had also decided to send a delegation to NAICOM to give some considerations in implementing the recapitalisation of the sector.
The three major decisions they decided to bring before the regulator, it was learnt, are: NAICOM should extend the recapitalisation deadline to between two and three years, consider shareholders’ capital in its requirements, and reduce the capital base.
In a recent circular by NAICOM to its regulated entities, life insurance companies’ capital was raised from N2bn to N8bn, general companies’ got a raise from N3bn to N10bn, while composite insurance companies’ capital was raised from N5bn to N18bn. NAICOM stated that the insurance firms’ paid-up capital would be their new capital base.
The regulator also increased the capital of reinsurance companies from N10bn to N20bn. NAICOM stated that the commencement date for the circular was May 20, 2019, while the deadline was fixed at June 30, 2020.
At the meeting, they agreed that there was a need for the industry to beef up its capital to enable it to underwrite bigger risks and fulfil its obligations to the insuring public. But they were also disturbed by requirements which they felt would be unachievable by most of the companies.
The underwriters noted that global convention standard for such recapitalisation was 18 months, of which they were given just a year to comply. They also noted that the capitals, which were more than tripled in some instance, would be a very high hurdle for most of the underwriters to scale.
Over the years, NAICOM had been preaching the need for the insurance companies to merge and become stronger entities, but it had not been able to achieve this voluntarily.