By Dipo Olowookere
The minimum operating capital of insurance companies operating in Nigeria has again come to the fore following an announcement made yesterday by the industry’s regulator, the National Insurance Commission (NAICOM).
The regulatory agency said it was raising the minimum paid-up share capital of insurance and reinsurance firms so as to make the sector stronger and better.
In a circular to all insurance and reinsurance companies signed by NAICOM’s Director, Policy and Regulation Directorate, Mr Pius Agboola, on behalf of the Commissioner for Insurance, Mr Mohammed Kari, it was said that the new capital regime would take effect from June 30, 2020 for existing insurance and reinsurance firms, but with immediate effect for new firms entering into the business.
“The new minimum paid-up share capital requirements shall take effect from the commencement date of this circular for new applications while existing insurance and reinsurance companies shall be required to fully comply not later than June 30, 2020.
“The provision in respect of requirement of statutory deposit as stipulated in part III, section 10 of the insurance Act 2003 shall apply on the effective date of commencement of this circular,” the circular stated.
The circular explained that in July 2015, the insurance industry witnessed its last recapitalisation and despite the astronomical increase in value of insured assets, consequent exposure to higher level of insured liabilities and operating cost of insurers, same capital continued to rule in the insurance industry.”
Under the new capital regime, life insurance underwriting firms, which currently have a minimum paid up share capital of N2 billion, will be required to have not less than N8 billion as capital base.
Also, insurance firms underwriting general business have been asked to shore up their capital from N3 billion to N10 billion, while insurance companies underwriting both life and general business must now have N18 billion instead of the N5 billion in the former regime.
In addition, NAICOM said reinsurance companies willing to remain in business in the country must have N20 billion against the N10 billion.
Recall that recently, NAICOM came up with a Tier Base Minimum Solvency Capital, which did not eventually scale through.
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