The House of Representatives yesterday directed the National Insurance Commission (NIACOM) to suspend the planned December 31, 2020 mandatory deadline for the first phase of 50% – 60% of the minimum paid up share capital for insurance and reinsurance companies.
The House said the suspension would last for six months from January to June 2021 to cushion the efforts of COVID-19 and other unforeseen circumstances on the insurance industry.
The resolution followed the adoption of a motion of urgent national importance, titled, ‘Need to Suspend the Proposed Recapitalisation of Insurance Companies, Insurance Intermediaries and Other Players in the Insurance Sector, especially in View of the COVID 19 Pandemic and the Economic Recession,’ sponsored by Hon. Benjamin Okezie Kalu and 15 other lawmakers.
Moving the motion, Kalu recalls that NAICOM issued a circular dated May 20, 2019 on the minimum paid-up share capital requirement for insurance and reinsurance companies.
This circular, he said effectively increased the minimum paid up share capital for insurance and reinsurance companies and the original deadlines were May 29, 2019 for new companies, while, June 30, 2020 was to apply to existing companies.
He listed the changes to the minimum paid up share capital 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, which was later moved to December 31, 2020.’
The lawmaker noted that as a result of the COVID-19 pandemic, the deadline was moved by NAICOM, via Circular NAICOM/DPR/CIR/25-04/2020 and dated 3 June 2020.
Kalu expressed concerns that if NAICOM is allowed to proceed with its programme as planned, it could negatively affect the economy and slow down the recovery process.
He said: “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 per cent for reinsurance companies must be met on the same date. Total compliance with the total minimum capital requirement must be achieved on or before 3September 30, 2021.”
“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.
“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 tons of 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 programme because of the overall impact it may have on the already fragile economy and the insurance sector.”