The National Insurance Commission (NAICOM) has announced the recapitalization of insurance and reinsurance companies, an exercise that was last carried out between years 2005/2007 in the insurance industry. This was disclosed in a circular released yesterday, Monday, the 20th of May, 2019 in Abuja.
The minimum capital base for the following lines of insurance businesses were reviewed as follows:
- Life Insurance was increased from N2, 000, 000, 000.00 (Two Billion Naira) to N8, 000, 000, 000.00 (Eight Billion Naira),
- General Business was increased from N3, 000, 000, 000.00 (Three Billion Naira) to N10, 000, 000, 000.00 (Ten Billion Naira), and
- Composite Insurance was increased from N5, 000, 000, 000.00 (Five Billion Naira) to N18, 000, 000, 000.00 (Eighteen Billion Naira).
While reinsurance’s minimum capital base was increased from N10, 000, 000, 000.00 (Ten Billion Naira) to N20, 000, 000, 000.00 (Twenty Billion Naira).
These new directives mandatorily applies to all insurance and reinsurance companies with the exception of Takaful Operators and Micro Insurance Companies. The new minimum capital base requirement took effect from Monday, the 20th of May, 2019, the date of the circular.
Existing insurance and reinsurance companies are required to fully comply with these new minimum capital base directives not later than Tuesday, the 30th of June, 2020.
The statutory deposit, stipulated in S. 10 of the Insurance Act 2003, i.e. the mandatory deposit of the equivalent of 50% of the paid-up share capital by an insurer intending to commence insurance business in Nigeria with the Central Bank of Nigeria (CBN), shall also apply to the new capital base directive for both the insurance and reinsurance companies commencing from 20th of May, 2019.
Worthy of note is S. 9(4) of Insurance Act, which empowers NAICOM to increase from time to time the amount of minimum paid-up share capital.
According to NAICOM, all insurance and reinsurance companies are required to ensure strict compliance with the circular.
With this new recapitalization, there will emerge stronger and more financial stable insurance companies which would invariably restore public confidence and encourage international competitiveness.