Insurance operators, under the Nigerian Insurers Association (NIA), have voiced strong opposition to the proposed minimum capital base requirements outlined in the Reform Insurance Bill. The bill, which was discussed during a public hearing at the National Assembly in Abuja last week, stipulates a minimum capital of N25 billion for non-life insurance, N15 billion for life insurance, and N45 billion for reinsurance.
During the public hearing, held on Thursday and Friday, the insurers proposed alternative minimum capital requirements of N8 billion for life insurance, N10 billion for non-life insurance, and N20 billion for reinsurance. They advocated for the implementation of a Risk-Based Capital (RBC) regime, which would allow them to manage risk in accordance with their capital.
Also read NAICOM Affirms Commitment to Align Insurance Sector with Economic Growth Goals
Sources indicate that many operators first learned about the proposed capital requirements through an exclusive report by Inspenonline. In addition to the NIA, other key industry bodies such as the Chartered Insurance Institute of Nigeria (CIIN) and the Nigerian Council of Registered Insurance Brokers (NCRIB) also made submissions during the hearing.
According to the bill, which has already passed its first reading in the Senate, risk-based capital will be determined periodically by the National Insurance Commission (NAICOM). Section 15, subsection 1 of the bill specifies that insurers must maintain a minimum capital of either the stipulated amount or a risk-based capital determined by the Commission. This applies to non-life, life, and reinsurance businesses.
Also read Stakeholders Clash Over Bill to Amend Nigeria Deposit Insurance Corporation Act
The bill outlines that the RBC required will consider insurance risk, market risk, credit risk, and operational risk. It also mandates that for new companies, the minimum capital requirement may include government bonds, treasury bills, cash, and cash equivalents. Existing companies are required to meet these standards with assets over liabilities, subordinated liabilities approved by the Commission, and other prescribed financial instruments.
Insurers registered before the bill’s commencement must comply with the new requirements within 12 months. NAICOM will cancel the registration of any insurer failing to meet these standards and publish a list of compliant insurers within 30 days of the deadline.
Furthermore, NAICOM may direct insurers to increase their minimum capital based on the nature, size, and complexity of their business and risk profile. New insurers must deposit 50% of the minimum capital with the Central Bank of Nigeria (CBN), while existing companies must deposit 10%.
Also read Lagos State Governor Mandates Health Insurance for All Workers and Residents
Under the previously aborted recapitalization exercise, NAICOM had set lower capital requirements: N8 billion for life insurance, N10 billion for non-life insurance, N18 billion for composite insurance, and N20 billion for reinsurance.
As the debate continues, the insurance industry awaits further developments and decisions from the National Assembly and NAICOM.
