The National Insurance Commission (NAICOM) is considering a fresh round of recapitalsation for insurance companies and may likely roll out new requirements to that effect this year.
It was gathered that the commission, through a likely upward review of capital bases for all categories of insurance companies, seeks to forge a stronger insurance industry that could underwrite large accounts and be globally competitive.
Also gathered was that NAICOM would announce the fresh recapitalisation guidelines before it fully transit to risk-based supervision and that might happen this year, Daily Trust reported.
Currently, insurance firms have to meet a capital base requirement of at least N2 billion for life insurance and N3 billion for non-life insurance, and N5 billion for composite insurance companies. Also, the reinsurance companies operating in the country needed a minimum capital base of N10 billion. These classes of capital base came into effect in 2007, when the confidence of the insurance market was largely low, but, now the industry has picked and the insurance companies risks appetite have increased.
Sources, who craved anonymity, said NAICOM was worried that some insurance companies were taking risks they didn’t have the requisite capacity to insure, adding that some firms were not even charging economic rates, especially on the compulsory classes of insurances, a situation the new capitalisation would address.
He didn’t say how much capital base NIACOM was considering for the different insurances classes. He however noted that the rates would immediately precede the guidelines on risk-based underwriting architecture for insurance companies.
The Commissioner for Insurance/CEO NAICOM, Mohammed Kari, gave an indication, last week, on Channels TV, that the Commission would pursue a fresh round of capitalisation, even though he didn’t give specifics.
“In the process of establishing risk-based supervision, we are encouraging insurance companies to come together and form stronger entities. Where they cannot financially increase their capabilities and abilities, we encourage them to stay within lower classes of insurance within their financial abilities,” he said.
“It doesn’t make sense for an insurance company with financial capacity to do household insurance to be involved in aviation or oil and gas. But there will still be a global reform on capitalisation. We have set up the process of doing capital verification to see where the insurance companies are,” Kari explained.
“We are coming up with a holistic capital requirement vis-a-vis the solvency and financial ability of the companies,” he said.