As the nation\'s insurance industry awaits anxiously for government\'s pronouncement on new minimum capital base for the industry, officials of the Nigerian Insurers Association (NIA) are intensifying campaign to enlighten government officials on the need to take into consideration basic performance indices regarding the industry.
The Guardian gathered that top governing council members of the NIA led by the ICON of the industry, Professor Joe Irukwu met the Minister of Finance, Dr. Ngozi Okonjo-Iweala at Abuja specifically to enlighten the government officials back-up with statistics on the peculiarities of insurance business, and the need to take basic facts into consideration for the government to be able to come out with a decision that may help the industry to grow.
Industry sources told The Guardian that the minister of Finance was not only impressed by the statistics produced by the association on capitalisation in the emerging African and Asian insurance markets, but also commended the NIA for presenting their case with basic data to support their submission.
The yardstick suggested by the NIA include Nigeria\'s insurance penetration and density as well as the level of per capita income of Nigerians and the disposable income of the people towards buying insurance.
However, at a meeting of the stakeholders with the minister of Finance in Lagos recently on the issue, the NIA in its memorandum proposed that any further increase in the capitalisation of insurance companies should be considered along certain criteria including the following.
The number of insurance companies operating in the country, the present minimum paid-up share capital, the level of capitalisation in other developing markets, insurance density in Nigeria and emerging markets, insurance penetration in Nigeria and emerging markets.
Others include that capitalisation level and asset of insurance are not the only means of insurers\' financial capacity to cover risks, the date of last increase in share capital of insurance companies, the fact that the national currency has been stable within the last one year, that fact that the present recapitalisation of banks will have effect on availability of investible funds, and returns on investment in insurance business generally.
The NIA in the memorandum explained that the ability of an insurance company to cover risk adequately, that is, financial capacity does not depend solely on share capital and assets.
Although, the net retention capacity of a company for a particular risk will be influenced by the premium income volume and capital up to five per cent and 10 per cent respectively, the association explained, an enlarged technical capacity could be created through reinsurance treaty arrangements.
The NIA articulated that to stimulate further growth and development in the industry, life insurance (long term business) should attract a new capital base of N1 billion or US $7.4 million, with 24 months grace period of recapitalisation.
Meanwhile, the National Insurance Commission (NAICOM), a fortnight ago proposed to the Federal Government that the minimum capital base for insurance business in Nigeria should be raised from the present level of N150 million for life business to N2 billion, non life business which presently is N200 million be jerked up to N4 billion while composite insurance business now structured at N350 million be jerked up to N12 billion as the first option, while the commission\'s second option recommendation are N2 billion for life business, N3 billion for non life business and N10 billion for composite underwriting companies.
However, whether the government will accept the recommendations of the commission is another issue when viewed from the depth of data on insurance business performance in Nigeria is yet to be seen.