The National Insurance Commission (NAICOM) may increase the capital base of insurance firms to about N15 billion anytime from now.
According to industry sources, NAICOM may mandate insurance firms to recapitalise or merge in order to meet the new capital requirement.
Nairametrics understands that the current minimum capital requirement of life insurance firms is N2 billion, while non-life is N3 billion; even as composite is N5 billion.
What insurance firms should expect?
When NAICOM finally confirms the increment of the capital base for insurance firms, recapitalisation will become compulsory. This will be unlike the optional window introduced by the Commission through the Tier-Based Minimum Solvency Capital (TBMSC) policy, which was rejected by the operators and later withdrawn by the Commission.
Although NAICOM‘s Mohammed Kari has been silent on the issue, sources close to the situation said the Commission is, indeed, working underground to bring the new recapitalisation to fruition soon.
Before the cancellation of the TBMSC, Kari had stated that there was the need for insurance companies to recapitalise.
“AS INSURERS CONTINUE TO TAKE TOO MUCH RISK WITH THEIR LITTLE CAPITAL, COUPLED WITH THE TWIN RISKS ARISING FROM IMPAIRMENT OF CERTAIN ASSETS AND INAPPROPRIATE PRICING OF INSURED RISKS, THERE HAS BEEN AN INCREASING INABILITY OF MANY INSURERS TO HONOUR CONTRACTUAL COMMITMENTS TO THE INSURED AND THE SHAREHOLDERS.
Kari also assured that the recapitalisation would boast the soundness and profitability of insurers, support the stability of the financial system and increase insurance contribution to the nation’s Gross Domestic Product (GDP); and limit significant systemic risks and build confidence in the industry, THEREBY ensuring the stability of the insurance sector.