NAICOM Cancels Controversial Insurance Industry Recapitalisation
The controversial recapitalisation exercise in insurance industry, tagged Tier Based Solvency Capital increase, initiated by the insurance industry regulator, the National Insurance Commission (NAICOM), has been cancelled. The commission officially announced the cancellation at the weekend through a circular dated Novermber23, 2018 circulated to all insurance companies.
In the circular, titled "Withdrawal of circular on Tier Based Solvency Capital policy for Insurance Companies in Nigeria,” the commission stated, "Pursuant to the powers conferred by the enabling laws, the commission hereby withdraws and cancels the circular dated August 27, 2018 with reference number NAICOM/DAPCIR/14/2018 and titled Tier Based Solvency Capital Policy for Insurance Companies in Nigeria. This withdrawal and cancellation takes immediate effect."
The circular was signed by the Director (Policy and Regulation) of the commission on behalf of the Commissioner for Insurance, Alhaji Mohammed Kari.
The cancellation is sequel to the controversy that has trailed the Tier Based Capital increase announced by NAICOM in August. The controversy ensued when the commission shifted backwards the deadline for compliance with the capital
increase by insurance firms from January 1, 2019 to October1, 2018.
Following the backward shift of the deadline and other issues, which did not go down well with the operators, the exercise met series of opposition from insurance firms.
The policy had cateqorised insurance firms into tier one, tier two and tier three levels of capitalisation based on their risk bearing capacity. Opposition to the policy was mainly from those who fall within tier three level and who have the least capital, as they were afraid of losing most of their customers to tier one and tier two firms with bigger capital. Their opposition instigated the industry's shareholders to seek for legal redress after which the commission was compelled to put the exercise on hold until the final judgement was delivered.
At the first hearing on the matter, the Lagos High Court ordered NAICOM to stop the implementation of the proposed minimum solvency capital policy scheduled to take effect from September 14, pending the expiration of a 30-day pre-action notice.
Justice Muslim Hassan, gave the order in a class action brought by some shareholders of insurance companies in Nigeria, challenging the new minimum solvency capital policy proposed by the NAICOM.
Following the order, NAICOM refrained from the October 1 deadline for implementation of the exercise, until last weekend when it officially announced the cancellation.
NAICOM had in July 25 announced the upgrading of minimum solvency capital of insurance companies from a minimum of N2 billion, N3 billion for life and non-life companies, respectively, to new levels, according to the weight of risk each operating firm has decided to bear.