Insurance Companies Risk Sanction As NAICOM Issues New Guideline For New Capital Base

The deadline for insurance and reinsurance companies to meet its new capital requirements has been extended by the National Insurance Commission (NAICOM). The companies were expected to meet new capital requirements by December 31, 2020, but a new circular shows the requirements have been revised, while the date has been shifted forward.

NAICOM stated that the new capital requirements must be met by September 30, 2021, however, it split the requirements for the companies to meet by December 31, 2020 and September 30, 2020.  By December ending of this year, the insurance and reinsurance companies are expected to meet about half of the new capital requirements, while the balance is expected to be met by ending of September 2021.

What You Need To Know

The new capital requirements of Life and general insurance companies was increased from N2 billion and N3 billion to N4 billion and N5 billion respectively by the end of December 2020. And by September ending next year, the companies are expected to meet the final capital requirements of N8 billion and N10 billion respectively.

Meanwhile, the new capital base of Composite companies and reinsurance firms was increased by NAICOM from N5 billion and N10 billion to N9 billion and N12 billion; this must be met by end of December 2020. The companies are expected to increase the capital base to N18 billion and N20 billion respectively by September 30, 2021.

This was made known in the circular titled, ‘Segmentation of minimum paid-up share capital requirements for insurance companies in Nigeria.' said, “We refer to earlier circulars referenced NAICOM/DPR/CIR/25/2019 dated May 2019 which introduced the new capital requirement for insurance companies in Nigeria, and NAICOM/DPR/CIR/25-03/2019 dated December 30, 2019 which extended the deadline for recapitalisation.

“The incidence of COVID-19 pandemic has made it difficult to proceed with the 31st December, 2020 recapitalisation deadline.

“A review of the recapitalisation deadline, therefore, became imperative in order to mitigate likely negative consequences of the pandemic on the exercise.

“The commission hereby extends and segments the recapitalisation process into two phases as follows:

“Fifty per cent of the minimum paid-up capital for insurance and 60 per cent for reinsurance shall be met by 31st December 2020.

“Insurance companies are required to fully comply with the approved minimum paid-up capital not later than 30th September 2021.”

Meanwhile, insurance companies that fail to increase their capital base as required by NAICOM before new year, will see the extent of their business or services restricted.