The House of Representatives has passed a resolution directing the National Insurance Commission (NIACOM) to suspend the planned December 31, 2020 mandatory deadline for the first phase of 50%– 60% of the minimum paid-up share capital for insurance and reinsurance companies.
The Bill, sponsors and timeline
The resolution followed the adoption of a motion of urgent national importance titled: “Need To Suspend The Proposed Recapitalisation Of Insurance Companies, Insurance Intermediaries And Other Players in the Insurance Sector, especially in View of the COVID-19 Pandemic and the Economic Recession,” duly sponsored by Hon. Benjamin Okezie Kalu and 15 other lawmakers.
With the adoption of the motion for the suspension of the recapitalization process, Ahmed Idris Wase, the Deputy Speaker, who presided over the plenary session referred it to the House Committee on Insurance.
According to the House, the suspension is expected to last for six months from January – June 2021 and is necessary to give the insurance operators soft landing, as well as cushion the effects of Covid-19 and other unforeseen circumstances they might have suffered.
What they are saying
According to Hon. Kalu, “In times as this, the best move by the government and by regulators is to push more liquidity into the economy in a bid to stimulate economic activities, encourage spending and prevent job losses as well as support the indigenous businesses in the country.
“This is pertinent because in addition to the impact of the COVID-19 pandemic, the industry was also affected by the aftermath of the #EndSARS protest in which several insured properties were affected and to this effect, most of these insurance companies have lots of liabilities to settle in order to fulfil their obligations so as not to deny the rights of these affected insured persons”
“These are the types of fiscal, monetary and regulatory approaches that are being adopted in most countries. Hence, it may not be suitable at this time for NAICOM to even proceed with its planned phased recapitalization programme because of the overall impact it may have on the already fragile economy and the insurance sector.”
Why this matters
- NAICOM introduced two-phased recapitalization programmes, wherein, 50% of the minimum paid-up share capital for insurance companies must be met by 31 December 2020 and 60% for reinsurance companies must be met on the same date.
- Total compliance with the total minimum capital requirement must be achieved on or before 30 September 2021.
- With the Covid-19 pandemic and the #EndSARS protests which crumbled the Nigerian economy, a lot of insurance companies are yet to commence full businesses activities and thus compelling them to meet these requirements would definitely put them out of business and throw a number of people out of jobs.
- Related to the #Endsars protests, some of the insurers have lots of liabilities to settle in order to fulfil their obligations to the affected insured persons, with huge impacts on their liquidity.