Nigerian Insurance sector regulator, The National Insurance Commission (NAICOM) has introduced new capital requirements for the country’s sector participants.
According to the regulator, the new capital regime will become effective from 1st January 2019,
The new capital requirements which is classified in three tier , is to compliment the industry risk based supervision framework started in 2009, which is aimed at making the insurance industry optimise its potential and contribute maximally to the Nigerian economy.
In the new Tier-Based Minimum Capital released by NAICOM yesterday, companies will be classified based on their 2017 financial accounts. In this vein, Tier 3 companies are those that falls within existing paid up capitals of N2 billion for life business; N3 billion for non-life business and N5 billion for composite business.
Companies in this category will be limited to underwrite only risks in life business in the following areas – Individual Life, Health Insurance, Miscellaneous Insurances; while for non-life they will be limited to underwrite risks in these areas – Fire, Motor, General Accident, Engineering (only classes covered by compulsory insurance), Agriculture and Miscellaneous Insurances.
Tier 2 companies are those whose paid up capital has increased by 50 percent above the existing minimum capital as par their 2017 financial accounts.
For Insurers interested in life business, their paid up capital will be N3 billion and they are to underwrite all Tier 3 risks and Group Life Assurance (GLA); while for non-life, their paid –up capital base will be N4.5 billion and they will underwrite all Tier 3 risks, Engineering (All inclusive), Marine, Bonds Credit Guarantee and Surety-ship Insurances.
Tier 1 companies are those whose paid up capital has increased by 200 percent, above the existing minimum requirement. Life companies in this category will have capital of N6 billion, and will underwrite all Tier 2 risks and Annuity. While for non-life business, the paid up capital will be N9 billion, and will underwrite all Tier 2 risks and Oil & Gas (oil related projects, exploration & production), and Aviation Insurances.
Composite companies in Tier3 will maintain N5 billion; Trier 2 N7.5 billion and Tier 1 will have N15 billion.
According to the Commission, Transition guidelines will be released by 3rd August 2018; Issuance of notification letters (Tier assessment Advice to all Operators) on assessed Capital level will be given between 13th – 17th August, 2018; while submission of Board’s decision by Operators (on choice of Tier-Level) to NAICOM is expected not later than 14th September 2018.
Sunday Thomas, deputy commissioner for Insurance, Technical briefed the press after the Insurers Committee Meeting
“Thomas said one of the challenges NAICOM as a regulator has had is being able to align the drive for penetration with operators living up to their bids.
Thomas stated that the Commission has identified all the affected stakeholders including the board, management and their key officers as well as shareholders and will carry them along to ensure smooth implementation of the programme.
He however noted that by the new arrangements the Commission has not compelled any insurance company to increase capital, but operate within their choice area where they have adequate capital.
Thomas noted that Reinsurance companies are not affected by this development, as theirs will be considered in the near future, but stated also that the new capital will stimulate appetite for new licensing to investors willing to operate in Tier 1.