The Finance minister, Zainab Ahmed has stopped the insurance regulator, the National Insurance Commission (NAICOM) from announcing a new capital requirements of N18 billion for underwriters in the country.
The new capital requirements that was allegedly scheduled for announcement last Thursday December 20 after ratification by the commission’s board, was said to have been halted by the minister who requested for time to study the new intended recapitalisation and its likely impact on the industry.
The regulator on November 23 cancelled the Tier-Based Minimum Solvency Capital (TBMSC) model of recapitalisation owing to litigation from shareholders of insurance companies who complained that the timeline allowed for operators to comply was too short in view of the current situation of the country.
The TBMSC announced in July 2018 and allegedly opposed by Kemi Adeosun, the then finance minister, ought to be effective last October.
NAICOM, on same day, December 20 that would have announced the new capital requirement, withdrew the guidelines for the State Insurance Providers (SIPs) which is to encourage state governments to undertake insurance brokerage services.
The brokers’ association, the Nigerian Council of Registered Insurance Brokers (NCRIB) which moved against the SIP guidelines, cited illegality and threatened court action against the commission. The two parties met in Lagos on December 19 where the issues were thrashed leading to the withdrawal of the guidelines.
Under the new capital propositions that the minister has put on hold, Life insurance companies are required to have N8 billion, an increase of N6 billion over the current capital base.
Non-Life companies are expected to go up to N10 billion from the N3 billion that currently obtains.
For a composite insurance provider, the commission will be asking them to go up to N18 billion from the current N5 billion. The new proposition for Composite business is N3 billion over the recommendation of the recently cancelled TBMSC which sets capital base for such player at N15 billion.
The insurance brokers that on Thursday, December 20 survived the onslaught of the guidelines on the SIP which NCRIB complained, will kill the industry’s marketing arm, are again under the radar of the commission in a new set of guidelines, part of which will rout from the industry, chief executives officers that have spent 10 years on the position.
Sources at the Finance ministry confided inInsideBusiness Online that the commission rallied its board Thursday and got the members to ratify the new propositions and allegedly had a speech ready for the announcement.
With the minister’s decision to keep the latest proposition in view, the commission between November and December this year, has succumbed thrice to superior arguments by the market on two critical policies that it claimed will deepen the industry’s growth.
Rasaq Salami, the Head, Commissioner’s Directorate, who also heads the Corporate Communications in reaction to InsideBusiness Online’s inquiries was silent on Thursday development but noted that the regulator is empowered by its enabling act to make policies including recapitalisation.
“The law is clear on procedures for the commission to increase capitalisation and these are spelt out in the enabling act” he said.
He declined further comments but noted that the commission will announce when it decides to.
“The minister has requested from alternative sources, analysis on the current share capital of insurance underwriters vis a vis their premium income” says a source at the Finance ministry.
“The summary of the analysis is that the companies are currently under-trading and no need for such recapitalisation” according to a source that is familiar with the issue
Further findings show that a comprehensive review of the industry and comparative analysis of the industry’s share capital, rating, and performance vis-a-vis that of its counterparts in Morocco, Kenya and another African country are currently being worked on, to better equip the minister in the event that NAICOM comes back for her views.
Insurance underwriters were relieved in November when the Commission announced the cancellation of the TBMSC recapitalisation model that graduates operators according to their financial capabilities
The commission in a circular referenced NAICOM/DPR/CIR/18/2018, and dated November 23 2018 to all Insurance companies, withdrew the August 27 circular that intimated them of the recapitalisation policy and also ordered its eventual cancellation.
The circular titled “Withdrawal Of Circular On Tier Based Solvency Capital Policy For Insurance Companies In Nigeria” and signed on behalf of the Commissioner for Insurance, by the Director, Policy and Regulation, Agboola T. Pius, read: “Pursuant to the powers conferred by the enabling laws, the commission hereby wothdraws and cancels the circular dated August 27, 2018 with reference Number NAICOM/DAPCIR/14/2018 and titled, ‘Tier Based Solvency Capital Policy For Insurance Companies In Nigeria”. This withdrawal and cancellation takes immediate effect”.
Under the TBMSC that was cancelled, the insurance market was categorised into three cadres and the players in the top bracket regarded as Tier-One are expected to shore up their capitalization to N15 billion representing 200 percent increase if they are to operate the composite form of business.
Such insurers will be allowed to handle individual life, health insurance, miscellaneous insurance and annuity for life and Non-Life comprising fire. Motor, general accident, Engineering, agriculture, miscellaneous insurance, Marine, Bonds Credit Guarantees & Suretyship, Oil and Gas (oil related projects, exploration and production) and Aviation.
Life insurance office in this cadre was ordered to jerk up its capitalisation from the current N2 to N6 billion and the Non-Life in this category will move from the current N3 billion to N9 billion.
Barineka Thompson, a Director of the Commission hinted in July that composite companies in Tier 2 cadre must look for N7.5 billion to operate within this bracket.
Such companies will under its Life branch underwrite individual life, health insurance, miscellaneous insurance and Group Life insurance.
The Non-Life insurance under the Tier 2 covers Fire, motor, general accident, Engineering, agriculture and miscellaneous, Marine, Bonds Credit Guarantee and Suretyship.
A life company that choose to play in the Tier 2 cadre is to grow its capitalisation to N3 billion while a Non-Life Underwriter that want to play in this cadre is to look for N4.5 billion.
The last group is the Tier 3 which currently is the capitalization in the industry.
Companies that lack the financial capability to grow their capitalization to the either of Tier 1 or Tier 2 are expected to continue to play in this cadre
The commission noted that the failure of some insurers to honour contractual
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