Tuesday, December 08, 2020 / 05:14 PM / By James Kwen of BusinessDay / Header Image Credit: @HouseNGR
Nigeria's House of Representatives has mandated the
National Insurance Commission (NAICOM) to suspend the planned 31st December,
2020 mandatory deadline for the completion of the first phase of 50 percent and
60 percent of the minimum paid-up share capital for insurance and reinsurance
companies for a minimum of six months from January 2021 in order to cushion the
effects of COVID-19 and other unforeseen circumstances on the insurance
industry.
This decision was sequel to the adoption of a motion
of urgent public importance sponsored by Benjamin Kalu (APC, Abia) and 15
others at plenary on Tuesday.
Moving the motion on behalf of others, Kalu recalled
that NAICOM is established by the National Insurance Commission Act 1997 to act
as the primary regulator for the insurance sector and the Insurance Act 2003,
particularly Section 9(1) and (4) empowers the Commission to prescribe minimum
paid-up share capital for insurance companies and intermediaries.
He also recalled that NAICOM had issued a Circular No.
NAICOM /DPR/CIR/25/2019 dated May 20, 2019 on the minimum paid-up share capital
requirement for insurance and reinsurance companies.
"The circular effectively increased the minimum paid
up share capital for insurance and reinsurance companies. The original
deadlines were 29 May 2019 for new companies, while, 30 June 2020 was to apply
to existing companies," Kalu said.
"The changes to the minimum paid up share capital were
as follows Life Insurance N2 billion to N8 billion, General N3 billion to N10
billion, Composite N5 billion to N18 billion and Reinsurance Nio billion to N20
billion. This was later moved to 31 December 2020," he said.
The lawmaker said as a result of the COVID-19
pandemic, the deadline was moved by NAICOM, vide Circular
NAICOM/DPR/CIR/25-04/2020 and dated 3 June 2020.
"In the Circular, NAICOM introduced a two phased
recapitalisation programmes, wherein, 50 percent of the minimum paid up share
capital for insurance companies must be met by 31 December 2020 and 60 percent
for reinsurance companies must be met on the same date. Total compliance with
the total minimum capital requirement must be achieved on or before 30
September 2021," Kalu said.
"In addition to the negative economic impact of the
COVID-19 pandemic, the Nigerian economy was just announced to be officially in
a recession. This signifies that there will be significant slowdown in economic
activities and the liquidity position of both the government and businesses are
seriously impacted, albeit, negatively," he said.
Kalu said in times as this, the best move by the
government and by regulators is to push more liquidity into the economy in a
bid to stimulate economic activities, encourage spending and prevent job losses
as well as support the indigenous businesses in the country.
"This is pertinent because in addition to the impact
of the COVID-19 pandemic, the industry was also affected by the aftermath of
the ENDSARS protest in which several insured properties were affected and to
this effect, most of these insurance companies have huge liabilities to settle
in order to fulfil their obligations so as not to deny the rights of these
affected insured persons.
"These are the types of fiscal, monetary and
regulatory approaches that are being adopted in most countries. Hence, it may
not be suitable at this time for NAICOM to even proceed with its planned phased
recapitalization progrmame because of the overall impact it may have on the
already fragile economy and the insurance sector," Kalu said.
He noted that if NAICOM is allowed to proceed with its
programme as planned, it could negatively affect the economy and slow down the recovery
process.
Credit:
The post Lawmakers
direct NAICOM to suspend Dec. 31 recapitalisation deadline for insurers
first appeared in Business Day on December 08, 2020.
Related to Recapitalization
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