The insurance industry risk-based capital roadmap expected to be released end of this month is creating jitters among players in the market.
The companies and their board are anxious to see the contents of the roadmap and how it will affect their capitalisation plans going forward.
Majority of the insurers are currently pursuing strategies to meet their long-term capitalisation objective after the last regulatory induced capital requirement was halted by court order.
Publicity Sub-committee of the Insurers Committee had disclosed after its last meeting in Lagos that the National Insurance Commission will release the risk-based capital road map end of April 2022.
Ebelechukwu Nwachukwu, chairperson of the publicity subcommittee said the commission was working to release the guideline by end of April, and has brief players to start marking preparations.
One of the pleas of the Commission is that operators should improve their documentation to enhance the efficiency of the supervisors, she said
The risk-based capital roadmap is intended to be a regulatory standard and not necessarily the full amount of capital that an insurer would need to hold to meet its objectives.
It helps to identify weakly capitalized companies, which facilitates regulatory actions to ensure policyholders will receive the benefits promised without relying on a guaranty association or taxpayer funds.
With planned adoption of risk-based assessment for insurance companies in Nigeria, NAICOM as foreclosed single capital requirement for players in the industry.
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Sunday Thomas, commissioner for Insurance had said with full implementation of the policy expected to deepen soonest, companies will be required individually to capitalise based on their risk appetite and vision.
He said the Commission is currently building capacity with training and retraining of its staff for effective implementation of the policy.
“NAICOM is in the process of strengthening its regulatory oversight and risk management capabilities that will improve its internal capacity for assessment of emerging risks.”
It is also working on improving industry readiness assessment, implement own risk and solvency assessment (ORSA), internal capital models, solvency test, stress testing, incentivize effective risk management enablers, among others.
Thomas said, companies will be advised after a stress test on what is appropriate capital requirement for their operations based on the risk they carry, and the commission will ensure its complied with.
If this happens, this brings to an end ongoing recapitalisation exercise in the industry that had expected players to increase their capital requirement to over 300 percent, which was to end 30th of September 2021, before it was halted by legal action against NAICOM.
Under the recapitalisation exercise, NAICOM had mandated life insurance firms to meet a minimum paid-up capital of N8 billion, up from N2 billion while general insurance companies were expected to increase their paid-up capital to N10 billion, from the earlier N3 billion.
Composite insurance (life and non-life operators) were asked to recapitalise to the tune of N18 billion as against the previous N5 billion while reinsurance businesses were required to have a minimum capital of N20 billion, from N10 billion.
