The Reform Insurance Bill’s proposed minimum capital requirements for insurance and reinsurance operations have sparked a divisive debate among industry practitioners. The Nigerian Insurers Association (NIA) has strongly opposed the proposed minimum capital bases of ₦25 billion for non-life insurance, ₦15 billion for life insurance, and ₦45 billion for reinsurance.
During a public hearing at the National Assembly in Abuja, NIA Chairman Kunle Ahmed presented the association’s stance, advocating for a reduced minimum capital of ₦8 billion for life insurance, ₦10 billion for non-life insurance, and ₦20 billion for reinsurance. Ahmed also proposed implementing a Risk-Based capital regime, which would allow insurers to undertake risks in line with their capital.
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Ahmed argued that the Nigerian insurance sector is not large enough to support the proposed increases without significant adverse effects. He highlighted international comparisons, noting Morocco’s capital requirement of $5 million for life and non-life businesses and Kenya’s requirements of $3.8 million for life and $2.3 million for non-life. He pointed out that South Africa has one of the biggest markets with the least capital requirements.
“Capital alone does not determine the capacity of an organization,” Ahmed said. “It determines your retention, but it’s not the single determinant of your capacity. We risk having insurance companies that are not deepening insurance business in Nigeria but are just investing the money they have in other things. We should focus more on deepening insurance in Nigeria.”
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Supporters of the proposed increases argue that the higher capital requirements are necessary due to inflationary trends and the federal government’s ambition for a $1 trillion economy. They believe the NIA’s proposed figures of ₦10 billion for non-life, ₦8 billion for life, and ₦20 billion for reinsurance have been overtaken by recent economic trends.
These proponents also expressed concern that with banks returning to universal banking, they might dominate the insurance space, potentially putting traditional insurers at a disadvantage. A shareholder emphasized the need for insurers to align with current realities, stating that the industry has lagged behind banks due to resistance to growth and recapitalization efforts.
A managing director of an insurance company argued that the industry needs more capital to secure larger risks domestically, citing that many special risks, like those at the Dangote refinery, are currently ceded abroad due to local insurers’ low capital.
In response to the polarized views, Inspenonline reported that the NIA leadership is actively engaging with the National Insurance Commission (NAICOM) to negotiate a mutually acceptable minimum capital requirement for the industry.
Summary:
The proposed capital requirements in Nigeria’s Reform Insurance Bill spark debate, with the Nigerian Insurers Association opposing high thresholds, advocating for lower minimums, and emphasizing the need for deepening the local insurance market.
Tags:
Insurance Reform, Capital Requirements, Nigerian Insurers, NIA, Reinsurance, Financial Sector,
Keywords:
- Insurance Capital Requirements
- Nigerian Insurers Association
- Reform Insurance Bill
