NAICOM introduces new draft regulations to strengthen capital standards for insurance companies
Joy Agwunobi
The National Insurance Commission (NAICOM) has unveiled an exposure draft titled ‘Insurance Risk-Based Capital Regulation, 2024,’ aimed at refining capital standards for insurance companies.
This release was made known through a circular (No: NAICOM/TD/SUP/FA) addressed to the CEOs of insurance institutions and signed by Oluwatoyin Charles, director of the supervision directorate, on behalf of the Commissioner for Insurance.
The draft specifies new minimum capital requirements for the insurance sector. It states, “The minimum capital requirements prescribed for the purposes of the Act is: in the case of a non-life insurer, N10 billion; in the case of a life insurer, N8 billion; in the case of a reinsurer, N20 billion.”
According to NAICOM, the circular outlines that the concept of Risk-Based Capital (RBC) hinges on globally recognized standards, aligning with the Insurance Core Principles (ICP) 17. The regulation adopts a comprehensive “total balance sheet approach” to establish regulatory capital requirements, focusing on critical risk categories such as Insurance, Market, Credit, and Operational risks.
In its communication, NAICOM emphasised, “We are pleased to forward the draft Insurance Risk-Based Capital Regulation 2024 (RBC Regulation) as attached. The concept of Risk-Based Capital refers to the principle for assessing Capital Adequacy adopting globally accepted regulatory standards for supervision of the insurance institution in line with Insurance Core Principles (ICP) 17.”
The commission further clarified, “To ensure the draft RBC Regulation is effective and practical, we invite your feedback and comments on the draft. Your input will greatly contribute to the finalisation of the Regulation. Kindly provide your feedback on or before 11th November 2024 via email.”
The circular reiterates that the key objective of this regulation is to ensure that insurers maintain capital levels commensurate with their risk profiles. Insurers are expected to develop and implement internal capital management policies. The regulation, the draft noted, would apply to all insurers registered under the Act, wherever applicable.
Regulated entities are expected to submit their feedback by the November 11, 2024 deadline.