The National Insurance Commission (NAICOM) is considering a fresh round of recapitalization for insurance companies and may likely roll out new recapitalization requirements this year.
Our correspondent gathered from reliable sources that the commission, through the 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.
NAICOM will announce the fresh recapitalization guidelines before it fully transit to risk based supervision and that may likely happen this year.
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 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.
Our source, who craved anonymity, said NAICOM is worried that some insurance companies are taking risks they don’t have the requisite capacity to insure adding that some firms are not even charging economic rates, especially on the compulsory classes of insurances, a situation the new capitalization will address.
He didn’t say how much capital base NIACOM is considering for the different insurances classes. He however noted that the rates will immediately precede the guidelines on risk based underwriting architecture fir insurance companies.
The Commissioner for Insurance/CEO NAICOM, Alh. Mohammed Kari just last week on Channels TV also gave an indication the Commission will pursue a fresh round of capitalization even though he didn’t give specifics still.
“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 had 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 capitalization. We have set up the process of doing capital verification to see where the insurance companies are”, Mr. Kari explained.
“We are coming up with a holistic capital requirement viz a viz the solvency and financial ability of the companies” he said.