Court Halts Insurance Industry Recapitalisation
Four days to the end of the first phase of the insurance industry recapitalisation, Federal High Court, Lagos has restrained the National Insurance Commission, NAICOM, from taking further steps in the exercise to increase the capital base of underwriters pending the hearing and determination of a suit before it.
Justice C. J. Aneke in an interim order after hearing an ex-parte motion that was filed by the Incorporated Trustees of the Pragmatic Shareholders Association of Nigeria, issued: “An order for maintenance of the status quo ante belum as of December 21, pending the hearing and determination of the motion on notice already filed”.
The court subsequently adjourned the case to January 12, 2021 for hearing.
The Shareholders’ association had in a motion marked FHC/L/CS/1797/2020 that was moved by its lawyer, I. C. Ifedora, prayed the court to restrain NAICOM from taking further steps or issuing further directives or circulars for the purpose of enforcing the December 31, 2020, and September 30, 2021 deadlines for the recapitalization of Insurance and Reinsurance Companies in the country.
It equally asked the court to stop the Defendant from imposing any restrictions on the business of any Insurance or Reinsurance Company for the purpose of enforcing NAICOM’s circular or directives on the recapitalization exercise, pending the hearing and determination of the motion for interlocutory injunction.
The Applicant told the court that NAICOM had in a circular it issued in May 2019, called for an increase in the minimum paid-up capital for insurance and reinsurance companies in Nigeria.
It said according to the circular, life insurance firms are required to meet a minimum paid-up capital of N8billion from its previous N2bn, while general insurance companies are required to raise their minimum paid-up capital to N10bn from N3bn.
The Applicant further averred that NAICOM equally raised the regulatory capital for composite insurance from N5bn to N18bn, while it increased the minimum capital of reinsurance businesses from N10bn to N20bn.
It said the firms were however ordered to comply with the new directive, not later than December 31, 2020, and September 30, 2021, respectively.
Dissatisfied with the action, the Applicant, approached the court, praying it to among other things, to determine whether in view of the global pandemic, the economic recession and the destruction of public and private properties during the #EndSARS protests and the impact these factors have on the business of insurance companies, the refusal of NAICOM to rescind the recapitalization deadlines was not an abuse of power and an unreasonable exercise of regulatory powers pursuant to the Insurance Act and the NAICOM Act.
The Applicant applied for an order of the court to set aside the circular that imposed the stated deadlines.
It urged the court to hold that carrying out of the deadlines would amount to divestment by NAICOM of their property rights in their investments.
The Shareholders’ action came three weeks after the House of Representatives in a motion, directed the National Insurance Commission (NAICOM) to suspend the December 31, 2020 deadline given to Insurance and Reinsurance companies in Nigeria.
The House in a motion by Hon. Benjamin Kalu hinged the suspension of the exercise on the Covid-19 pandemic and the current economic recession being experienced in the country.
Kalu recalled that the law establishing the NAICOM empower the body to regulate the insurance sector in the country and to prescribe minimum paid-up share capital for insurance companies and intermediaries.
Kalu, however, stressed that the negative impact of the COVID 19 pandemic has pushed the country into recession, causing a significant slowdown in economic activities while the liquidity position of both the government and businesses are seriously impacted, albeit, negatively.
He maintained that in time like this, the best move by the government and regulators is to push more liquidity into the economy in a bid to stimulate economic activities, encourage spending and prevent job losses as well as support the indigenous businesses in the country.
He emphasised this is pertinent because “in addition to the impact of the COVID-19 pandemic, the industry was also affected by the aftermath of the #ENDSARS protest in which several insured properties were affected and to this effect, most of these insurance companies have tons of liabilities to settle in order to fulfil their obligations so as not to deny the rights of these affected insured persons.”
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