Following the move by the National Insurance Commission (NAICOM) to mandate insurance firms to recapitalise, brokers may now have to distance themselves from doing business with financially-weak insurance firms.
This was revealed by the President of the Nigerian Council of Registered Insurance Brokers (NCRIB), Shola Tinubu, who warned brokers against doing business with insurance companies who have low financial records.
While addressing the recapitalisation exercise NAICOM recently mandated insurance companies to undergo, Tinubu described firms that would not be able to meet up with the regulator’s recapitalisation requirement “weak”.
He also stated that it is pertinent for brokers to take caution, as some members of NCRIB still indulge in placing businesses with companies that are challenged.
“It is no more news that NAICOM has jerked up the minimum paid-up capital of Insurance Companies in Nigeria.
“As insurance brokers, we cannot shy away from the fact that this directive will adversely affect the entire industry. As a proactive Council, we are critically examining the implications and possible solution to the effect the implementation would have on our members.”
Meanwhile, it is pertinent to note that every insurance firm will be able to meet up with the recapitalisation requirements by NAICOM. In view of this, stakeholders in the insurance industry are considering mergers and acquisitions.
Recall that NAICOM recently increased the minimum paid-up share capital of insurance and reinsurance firms, a move which sent shock waves across the country’s insurance sector.
Life insurance firms’ capital base was raised from N2 billion to N8 billion, while general companies got a raise from N3 billion to N10 billion. Meanwhile, composite insurance companies’ capital was raised from N5 billion to N18 billion while the capital base for reinsurance companies was also increased from N10 billion to N20 billion.
NAICOM has fixed June 30th, 2020 as the deadline for the compliance with the new capital base.