By Omobola Tolu-Kusimo
COVID-19 pandemic, continuous fall in oil prices, depreciation in the value of the naira, the closure of the airspace by the aviation sector, among many other challenges, have foisted uncertainty over the recapitalisation plan of the National Insurance Commission (NAICOM).
Now, insurance and reinsurance firms are waiting on the Commission to roll out new guidelines and deadline for ongoing recapitalisation.
Prior to the outbreak of the pandemic, the firms were working with a second guideline and a second deadline of December 31, 2020. The first deadline was June 30.
NAICOM had on May 20, last year mandated the 57 insurance companies and two re-insurers in the country to increase their minimum paid-up share capital. They were to recapitalise before the deadline or lose their licences.
The Commission had raised the minimum paid-up share capital of Life Insurance company from N2 billion to N8 billion; Non-Life insurance from N3 billion to N10 billion and Composite insurance from N5 billion to N18 billion.
Re-insurance companies on their part, were mandated to raise their capital base from N10 billion to N20 billion.
The Managing Director, Cornerstone Insurance Plc, Mr. Ganiyu Musa in an interview with The Nation said insurers are expecting a new guideline on recapitalisation exercise because Covid-19 has certainly disrupted the initial guideline.
He said: “In a recent discussion with the newly appointed Commissioner for Insurance, Mr. Sunday Thomas, mentioned that they are re-strategising, factoring the impact of the pandemic into the scene and creating different models to see which will be more result oriented.
“Thus, it is expected that a new guideline on recapitalisation exercise will be made available.
“In Nigeria, recapitalisation has proven to be a useful tool for sectoral reforms, the essence of this exercise is to enhance the capacity of insurers to undertake more risks, and by implication, put insurers in a better position to honour their obligations to policyholders.”
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Musa added that in the face of the economic realities and uncertainties, for most if not all insurers, solvency ratios will likely decrease as a result of the volatile financial markets impacting insurers’ assets and liabilities.
But he said whatever position is finally taken by the regulator, Cornerstone and its subsidiaries have the necessary financial resources and flexibility to ensure it is able to meet the minimum capital requirement within the time-frame set by the Commission.
The Commissioner for Insurance had earlier in a statement made available to reporters hinted on the possibility of extension of timeline for recapitalisation due to the pandemic.
He revealed that the Commission was concerned about the negative impact of the pandemic on the exercise by insurers and re insurers.
But he pointed out that while an extension may bring a sort of relief for some of the companies who may not be able to meet the December 31, 2020, others who have tidied up their books and are ready to meet the deadline may find it upsetting.
Without stating whether they will finally extend the timeline or not, Thomas urged operators to put in their best in the given circumstances, noting that the outcome of its consideration to ameliorate the negative effect will be communicated as soon as it is considered expedient.
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