The National Insurance Commission (NAICOM) said it is open to methods that would ensure insurance firms remain operational after the implementation of its recapitalisation plan.
NAICOM said its recapitalisation plan for the insurance companies wasn’t meant to force some firms out of business and if merger would enable them to operate effectively afterwards, it would support the firms through the process.
The Acting Commissioner for Insurance, Sunday Thomas, however, stated that for insrance companies that are unable to meet the requirements of NAICOM for the recapitalisation plan after the December 2020 deadline, the commission would help ensure their orderly exit from the insurance market.
Nairametrics had reported that the new capital structure for Life, Non-Life and Composite insurance companies, including reinsurance companies, were increased from N2 billion, N3 billion, N5 billion and N10 billion to N8 billion, N10 billion, N18 billion and N20 billion.
The increase in the capital base has received criticism from insurance firms like Mutual benefits Assurance. The recapitalisation threatens to reduce the number of players within the insurance markets, and the numbers will not just decline due to mergers, some companies will have to exit the market as they will be unable to cope with the requirements set by NAICOM.
Thomas said, “Ensure that recapitalised companies are liquid, ensure the safety of funds raised-payment into escrow account, ensure the orderly exit of unrecapitalised companies, and efficient resolution of pre and post recapitalisation governance and conflict,” he said in a Punch report.
Thomas further stated that the sector was willing to improve liquidity and the ability to settle claims. Part of the plan is also to support the utilisation of local content, the stability of the financial system, ensure profitability and position the insurance industry for existing opportunities and benefits within the insurance market.
Companies yet to meet the requirements: As of January 2020, NAICOM said no insurance company in the country had technically met the financial requirement set forth by the regulator. It was disclosed that the fact that some of these insurance companies now have investments in excess of NAICOM’s requirement does not equate to meeting the recapitalisation requirement.
In view of this, NAICOM debunked the claims of some insurance companies that they had recapitalised in line with NAICOM’s guidelines. This is because NAICOM’s recapitalisation directive is not just all about raising new capital; it is also about all the recapitalisation processes being met.