Ghana Increases Insurance Industry Capitalisation.
Just like its Nigerian counterparts, the National Insurance Commission (NIC) of Ghana has announced increase the capital requirements for conduct of insurance business in all the units of the industry.
The new regime which commences June 30, 2021 was announced in a June 20, 2019 memo after wide consultation with the industry operators in an exercise that started way back in 2017.
In the memo referenced NIC/CIR/ 15/HOS/COI and signed by the Commissioner of Insurance, Justice Yaw Ofori to all Chief Executive Officers of Insurance, Reinsurance Companies & Intermediaries and copied President, Ghana Insurers Association and President, Ghana Insurance Brokers Association.
Life and Non-Life insurance companies are now required to pay 50 million Ghanaian Cents up from the current 15 million Ghanaian cents
Likewise, reinsurance companies are also required to buoy up their capitalisation from 40 million Ghanaian Cents to 125 million Ghanaian Cents, while reinsurance broking firms will continue to pay one million Ghanaian Cent which they are currently paying.
In the new capital regime, insurance broking companies and Loss Adjusters are required to raise their capital from 300,000 Ghanaian Cents to 500 Ghanaian Cents.
The Commissioner of Insurance said to ensure that the recapitalization exercise achieves its’ intended objectives of improving the financial capacity and liquidity of the Insurance industry, companies will be required to meet the new requirements through fresh capital (cash) injection; or Capitalization of audited profits (retained earnings); or a combination of the above options.
Under the new regime, injection of property or revaluation surpluses are voided while unencumbered property that is introduced will have to be sold for cash and the proceeds capitalized by at least six months or by December 31, 2020.
The new capitalisation is also immediately applicable to all new applicants and pending applications while existing firms will have until June 30, 2021 to comply.
The Commission would accelerate the implementation of its Risk Based Solvency Capital framework to ensure that in addition to the new capitalisation, the capital of a firm is commensurate with the risks it bears.
Under the new timelines for meeting the new requirement, all firms are required to submit their recapitalization plan by August 3L,2019. The plan is expected to set out exactly how the new requirements will be met with timelines and milestones. This will include actions to be undertaken and the sources of any new capital injection.
“November 15, 2019, NIC will provide feedback on initial recapitalization plan and will commence one on one meeting with each insurance company on its recapitalization plan. After engagement with each firm, the NIC will provide written feedback on initial recapitalization plan.
“December 15,2019 Regulated entities to Submit final recapitalization plan and initial recapitalization plan to be finalized and submitted to NIC.
“June 30, 2021 all entities to meet new MCR; direct insurers are expected to have Equity of at least GHC 50 million Ghanaian Cent and Capital Adequacy Ratio (CAR) of 750%,” Mr. Ofori said.
In the new dispensation, reinsurers are expected to have equity of l25 million Ghanaian Cent and Capital Adequacy Ratio (CAR )150% while Insurance brokers and Reinsurance brokers are required to have equity of 500,000 and one million Ghanaian Cents respectively.
Ofori said the mandate of the Commission is to protect the interest of policyholders by ensuring a financially strong insurance industry, noting that the new capitalisation is one of the initiatives to achieve this.
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