The National Insurance Commission (NAICOM) on Monday increased the minimum paid-up share capital of insurance and reinsurance companies in Nigeria, giving them June 30, 2020 deadline for compliance.
NAICOM, the insurance industry regulator, increased the paid-up share capital of life companies from N2 billion to N8 billion, general business from N3 billion to N10 billion, composite business from N5 billion to N18 billion, and reinsurance companies from N10 billion to N20 billion, according to a circular issued on Monday and signed by Pius Agbola, director, policy and regulation directorate on-behalf of the Commissioner for Insurance.
According to the Commission, the minimum paid-up share capital requirement would take effect from the commencement date of the circular (May 20, 2019) for new applications, while existing insurance and reinsurance companies would be required to fully comply not later than June 30, 2020.
“In the exercise of the powers conferred on the Commission by the enabling laws, the minimum paid-up share capital requirement of insurance and reinsurance companies in Nigeria is hereby reviewed,” the circular read.
It said the new directive would apply to insurance and reinsurance companies other than Takaful operators and micro insurance companies.
“The provision in respect of requirement of the statutory deposits as stipulated in Part III, section 10 of the Insurance Act 2003 shall apply on the effective date of commencement of the circular,” the circular said.
Agbola urged all insurance and reinsurance companies to comply with the circular.
This is the second attempt by NAICOM to increase the capital requirement of insurance companies in the last one year, having introduced Tier-Based Minimum Solvency Capital (TBMC) in August 2018 before it was suspended and eventually withdrawn.
This was following resistance by some segments of the market and shareholder groups who felt it was not going to be favourable to their business and went to court and stopped the process before it was eventually withdrawn by NAICOM.
This exercise now will be the first statutory recapitalisation exercise that will be embarked on by the industry after the last one held between 2005 and 2007.
Under the cancelled TBMC, tier-3 companies were those that fall within existing paid-up capitals of N2 billion for life business, N3 billion for non-life business, and N5 billion for composite business.
Companies in this category were to be limited to underwrite only risks in life business in individual life, health insurance, miscellaneous insurances, while for non-life they were limited to underwrite risks in fire, motor, general accident, engineering (only classes covered by compulsory insurance), agriculture and miscellaneous insurances.
Tier-2 companies were to be those whose paid-up capital has increased by 50 percent above the existing minimum capital.
For life business, their paid-up capital were to be N3 billion and they were to underwrite all tier-3 risks and Group Life Assurance (GLA), while for non-life, their paid-up capital base would be N4.5 billion and they would underwrite all tier-3 risks, engineering (all inclusive), marine, bonds credit guarantee and suretyship insurances.
Tier-1 companies were those whose paid-up capital was increased by 200 percent, above the existing minimum requirement. Life companies in this category were to have capital of N6 billion and underwrite all tier-2 risks and annuity. For non-life business, the paid-up capital would be N9 billion, and they would underwrite all tier-2 risks and oil & gas (oil related projects, exploration & production), and aviation insurances.
Composite companies in tier-3 were to maintain N5 billion, tier-2 N7.5 billion, and tier-1 were to have N15 billion.
Modestus Anaesoronye
