Insurers have said they would not accept the offer by the National Insurance Commission’s (NAICOM’s) on segmentation of required capital and extension of deadline in its bid to recapitalise the industry.
According to Insurers, they are downcast that the Commission has refused to yield to their plea for NAICOM to recognise the billions of naira that has accumulated in their various contingency reserves as part of capital for recapitalisation.
Contingency reserve, in insurance, is the cash insurers set aside above the legal requirements to cover unexpected or unforeseen losses. It may be used to pay out claims or other underwriting expenses in the event that the money brought in from premiums and the loss reserves are not enough to cover costs.
The contingency reserve is saved from three per cent of Gross Premium Written (GPW) of insurance business or 15 per cent of Profit After Tax (PAT), whichever is higher.
It was gathered that many insurance companies have billions in their contingency reserves that can enable them meet the recapitalisation mandate if the regulator allows them add the money to their current minimum paid-up capital.
Aside the contingency reserve issue, the operators are also unhappy that NAICOM has not been able to provide the palliative promised to help reduce the cost of recapitalisation.
“The Commission didn’t do anything that we should appreciate. What is an extension without palliative? It amounts to nothing. There are some palliative that the Commission promised to help us get to ease the cost of recapitalisation.
“The palliative is what will help the industry not to lose money to double taxation by the Federal Inland Revenue Service (FIRS) while we will also be relieve of some charges by the Securities and Exchange Commission (NSE),” a top executive of one of the insurance firms said.
Another CEO said after the first recapitalisation guideline, the Commission promised to help get stimulus. But this is the third time they are releasing a guideline and they have not been able to provide any stimulus that can make us grow.
“We are not happy that the chosen definition of capital of minimum paid-up share capital will make us to lose money. They say they are relying on Insurance Act 2003 which some people in 2007 realised we shouldn’t have followed. We believe the requirementfor recapitalisation is a means of punishing us because the Commission believes we did not support the Tier-Based requirement that was first proposed. We have money for recapitalisation but it is the tax that will kill us that is the problem,” he added.