NAICOM to Raise Capital Base of Micro Insurance Firms

September 20, 2020

By Adedapo Adesanya

The National Insurance Commission (NAICOM) has disclosed that it was considering the idea of raising operating capital of micro-insurance businesses in Nigeria.

This was made known by the Commissioner for Insurance, Mr Sunday Thomas, in an exclusive interview with NAIPCO Trumpet, a journal published by the National Association of Insurance and Pension Correspondents (NAIPCO).

He noted that the amount of capital required for micro-insurance underwriting with respect to some of the sectors is looking unrealistic and that NAICOM may have to step in.

In his words, “Micro-insurance is one of the areas we want to fast track the process. We have a couple of applications that we should be able to conclude soon.

“One thing is for you to initiate something, another is for others to see the viability of the vision. We have this but people seem to be catching up with us in terms of our vision and their understanding of these vision.

“For us, micro-insurance in financial inclusion generally is the way to go. Financial inclusion is going to help us and it is going to drive penetration. I believe that with the way we are going about it, things will get better.

“We are trying to rejig the entire guideline to be more realistic. What we had before in the guideline issued about six years ago was the National, State and the Unit licensing of micro-insurance companies. The amount of capital required for this with respect to some of the sectors is looking unrealistic and we may have to tinker with it,” he said.

Clarifying the regulator’s position if it will lower the capital base of micro-insurance operation, Mr Thomas answered in the negative.

“No, it can’t get lower because if you look at the unit which requires N40 million thereabout, what can it do when you want to establish a sustainable company,” he asked.

He noted that the capital looked adequate as at the time it was conceptualised but obviously it is no longer adequate at the moment, stressing that the exchange rate was about N160 to a dollar when the business was conceptualised and now it is triple that amount.

He said this does not seem good to drive the business from a sustainable basis, adding that the commission is presently looking at business.

“So far, we have two that are States and one that has a National outlook which is Consolidated Hallmark. Already, the company has an insurance culture. The National company is required to operate with N600 million and of course, it will not be adequate. So we still believe that we need to do much more in micro-insurance and financial inclusion in general, for us to get the desired penetration,” he said.

According to the guideline on micro-insurance issued by NAICOM, a National Insurer, who seek composite micro-insurance licence, is expected to be capitalised to the tune of N600 million, while N400 million minimum capital base is needed from a general micro-insurance and N200 million for Life operations.

It noted that national operators are allowed to have a presence in at least six states within the three geopolitical zones of the federation.

For a state microinsurer, the minimum capital base is pegged at NI00 million, broken into N60 million for general and N40 million for life operators. The regulator also expects such underwriter to operate only in one state of federation with at least three branches or office locations, each in a different Local Government Area.

A unit microinsurer investor must be capitalised to the tune of N40 million, N25 for general business and N15 million for life, with operation in one location within a local community.

The regulator has, therefore, made it mandatory for these microinsurance outfits to make themselves visible and must be seen to be serving the low-income earners grassroots.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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