By Rosemary Onuoha
As insurance companies make various efforts to meet up with the recapitalisation programme, the National Insurance Commission, NAICOM, have been advised to ensure that no company dies but should convert those that fail to scale the hurdles to micro insurance firms.
The Managing Director/Chief Executive Officer, Achor Actuarial Services Limited, Mr. Pius Apere, who made the assertion, noted that converting failed insurers to micro insurance firms will deepen the micro insurance segment of the market.
Apere who spoke at the annual conference of the National Association of Insurance and Pension Correspondents, NAIPCO, in Lagos, said that it will be ideal to covert the failed insurers to micro insurance firms as they already have the required capital to operate in the micro insurance sector.
It will be recalled that the micro insurance guideline stipulates that a unit micro insurer must have N15 million as capital base for life business, N25 million for general business and N40 million for composite business.
A state micro insurer must have N40 million for life business, N60 million for general business and N100 million for composite business.
A national micro insurer must have N200 million for life business, N400 million for general business and N600 million for composite business.
However, Apere said that all existing insurance companies currently have capital base far above this requirement as a life company have N2 billion as capital base, general have N3 billion while composite have N5 billion.
Apere said, “Now that the Tier Based Minimum Solvency Capital, TBMSC, policy is cancelled, it will be appropriate to revisit the tiered minimum capital base approach for micro-insurance by encouraging existing conventional insurance companies that will not be able to recapitalize under the new recapitalization regime to register as national micro-insurers in order to serve the low-income segments, thereby supporting the evolution of more inclusive insurance systems. This would no doubt increase the number of micro-insurance providers needed significantly which in turn would accelerate the insurance penetration at the grass-roots in the country. Such un-recapitalized conventional companies would leverage more on their existing IT infrastructure, quality staff and with relatively lower expected strain on resources.”
According to him, the micro-insurance guidelines states that ‘Registered insurance companies shall be granted national micro-insurer license upon application’, which is in line with and/or similar to the concept proposed above.
He however stated that allowing the recapitalized conventional insurance companies to enter the micro-insurance market has its implications and consequences, in terms of unethical business practices, undue price competition (e.g. rate cutting) at the detriment of other micro-insurers.