Insurance industry to flag as NAICOM suspends October implementation of solvency policy

The expected improved operations of the insurance industry with the implementation of the tier-based solvency policy may hold back quick wins for the sector, according to analysts.

The analysts say it is now that the sector, which has remained static for decades, to seize the opportunity for growth. However, some operators and stakeholders, who are hardly prepared to take the gauntlet are trying to scuttle an otherwise novel intervention in the sector.

The regulator, National Insurance Commission (NAICOM), in a notification to all insurance sector stakeholders, said insurers are to maintain the subsisting regulatory framework in compliance to an injunction issued by the Federal High Court.

The statement read, “in compliance with the extant rules and injunction issued by the Federal High Court regarding the Tier-based Minimum Solvency Capital framework, which was to take effect from October 1, 2018, the Commission wishes to clarify that the status quo will be maintained and insurers are to continue to operate on the subsisting regulatory framework prior to the circular.”

Some shareholders of insurance companies had earlier sued the commission to a Federal High Court in Lagos for insisting on implementing the recapitalisation. In September 2018, Justice Muslim Hassan gave an order restraining NAICOM from enforcing the policy, pending the expiration of the 30-day pre-action notice dated September 4, 2018.

The recapitalisation policy entailed 3 capitalisation tiers; tier one is the highest capital base for each class and tier three is the minimum capital base required for each class.

Tier one life insurance firms will be required to have N6 billion as capital. Tier-2 life insurance firms will be required to have N3 billion, while tier three firms will maintain the current requirements of N2 billion.

Tier one non-life firms are mandated to have a capital base of N9 billion. Tier two firms in this segment are expected to have a capital base of N4.5 billion, while tier three firms will maintain the current capital base of N3 billion.

Insurance companies operating in all classes of insurance will also have three tiers. to the Nigerian Stock Exchange last week examined Companies operating in the tier one will be required to have a capital base of N15 billion. Tier two firms will need to have a capital base of N7.5 billion, while those in tier three will maintain the current capital base of N5 billion.