By Favour Nnabugwu
The National Insurance Commission (NAICOM) and the Nigeria Insurers Association (NIA) are in talks on the proposed recapitalisation of insurance companies.
Director-General of NIA, Mr Sunday Thomas in an interview with Vanguard in Abuja recently said the umbrella body will meet with NAICOM on how best its members can be recapitalised.
Thomas said, “The Minister of Finance, Ms. Kemi Adeosun has told us about the need for the industry operators to recapitalise. NIA will meet with NAICOM on the best way to go about it. And we will take it up from there.”
However, NAICOM has asked the 59 insurance companies in the country to report the capital needs of their businesses in a financial condition report in preparation for recapitalisation.
The Commission said it was necessary to determine regulatory capital that would be appropriate for the firms, which comprises life, non-life and composite, to hold sufficient capital to cover their risks and liabilities when they arise.
Commissioner for Insurance, Mohammed Kari stated that NAICOM would prepare a guideline that would be released in due course while it awaits report from companies as requested from them.
Kari said that NAICOM has been inundated with requests to clarify what she meant by her statement which read “would need to recapitalise.”
He said: “But I ask, what is there to clarify? However, there is nothing to panic about. It is the expectation of any business to have adequate capital to meet its liabilities.”
“This is more so in insurance business that has a time frame for companies to settle their claims. We have quite a number of companies that have either eroded capital base or have miss-matched their assets or liabilities cover, mostly arising from wrong investment decisions. Our concern is for the firms to hold sufficient capital to cover their risks and liabilities when they arise at all times. This is very crucial in turbulent times like the ones we are currently going through.
“While we are going to develop a full risk based capital framework, we will be expecting companies to initiate the appropriate capital adequacy reviews and have their actuary report the capital needs of their business in a financial condition report.
“A guideline would be released in due course. It is important for all insurers and reinsurers to get used to voluntarily holding capital that would protect policy holders against adverse outcomes that could negatively affect their ability to meet their obligations. Those in the annuity business can easily relate to this statement because of their experience in 2015.”
It will be recalled that the Minister of Finance at this year’s national conference said, “The insurance sector needs to raise minimum capital requirements in a manner that is comparative to what happened to the banking sector in the last two to three decades.
Adeosun emphasized, “Increased capital will provide funding for publicity and product development. It will raise the clout of insurance companies in policy formulation and will enhance our capacity to hire the best people and deploy the technology and marketing, product awareness and investment needed to support the industry.”