NAICOM withdraws tier-based recapitalization exercise, restructures, creates new directors
THE NA TIONAL INSUR ANCE COMMIS SION (NAICOM) has withdrawn and cancelled the circular on tier-based minimum solvency capital (TBMSC) policy.
The commission has also announced a restructuring and the creation of new directors to accommodate new directorates and state branch offices across the country.
In a string on regulatory statements made available to business a.m. Friday, the commission noted that the withdrawal and cancellation of the TBMSC take effect immediately.
The TBMSC initially expected to kick of January 1, 2019, was later rescheduled by the NAICOM to commence October 1, 2018. However, shareholders through a court injunction sought to put a stop to the policy.
The policy which is based on a respective risk classification, is a three-tier initiative which requires that for insurance for firms to be categorized in tier three which is the lowest, current minimum base capital of N2 billion for life insurers, N3 billion for non-life insurers, and N5 billion for composite insurers must be met while the minimum N10 billion for re-insurance companies was left the same for all tiers.
For life, non-life and composite re-insurers who wish to level up to tier two, they must have an additional 50 percent of their respective current capital base levels.
To play in tier one, the recapitalisation regulation requires life, non-life and composite insurers to possess an additional 200 percent of their respective current capital base.
The circular signed for the commissioner for insurance by Agboola T Pius, NAICOM’s director for pol- icy and regulations titled: “Withdrawal of Circular on Tier Based Solvency Capital Policy for Insurance Companies in Nigeria” and issued to all insurance companies, read that “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.”
Observers are of the view that the withdrawal and cancellation may probably be connected to the litigation by shareholders, who were not comfortable with the policy.
They noted that the step taken by the regulator is aimed at terminating the litigation as the parties in court would no longer have any base to pursue their case.
Uche Uwaleke, a professor of finance at the University of Nasarawa who had spoken to business a.m earlier on the benefits of the TBMSC, said the court order which emanated from concerns of some insurance firm shareholders, was borne out of them being destabilised thus causing the furore.
He said “I think recapitalisation for insurance firms is something that should be welcomed as it’s been done in the interest of the industry, just as we have seen in the success recorded in the banking industry.
Uwaleke noted that in doing this, he believes stakeholders should be carried along, but what he sees as a mistake on the part of NAICOM is bringing forward the deadline from January to October.
Meanwhile, Rasaaq Salami, head of the commissioner’s directorate disclosed that three new directorates have been created in the commission bringing the total number of directorates to nine.