House of Representatives has ordered the National Insurance Commission (NAICOM) to suspend the planned 31st December 2020 mandatory deadline for the completion of the first phase of 50 percent and 60 percent of the minimum paid-up share capital for insurance and reinsurance companies.
The house explained that its order is to cushion the effects of COVID-19 and other unforeseen circumstances on the insurance industry.
This came after the adoption of a motion of urgent public importance sponsored by Benjamin Kalu (APC, Abia) and 15 others at plenary on Tuesday.
Kalu who spoke about the commission said the NAICOM is established by the National Insurance Commission Act 1997 to act as the primary regulator for the insurance sector and the Insurance Act 2003, particularly Section 9(1) and (4) empowers the Commission to prescribe minimum paid-up share capital for insurance companies and intermediaries.
The federal lawmaker added that the commission had issued a Circular No. NAICOM /DPR/CIR/25/2019 dated May 20, 2019, on the minimum paid-up share capital requirement for insurance and reinsurance companies.
According to him, “The circular effectively increased the minimum paid-up share capital for insurance and reinsurance companies. The original deadlines were 29 May 2019 for new companies, while, 30 June 2020 was to apply to existing companies.
“The changes to the minimum paid-up share capital was 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. This was later moved to 31 December 2020,” he said.
“In the Circular, NAICOM introduced a two-phased recapitalisation programme, wherein, 50 percent of the minimum paid-up share capital for insurance companies must be met by 31 December 2020 and 60 percent for reinsurance companies must be met on the same date.
“Total compliance with the total minimum capital requirement must be achieved on or before 30 September 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 a significant slowdown in economic activities and the liquidity position of both the government and businesses are seriously impacted, albeit, negatively.”
Kalu explained further that 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.
He added: “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 huge liabilities to settle in order to fulfill 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 progrmame because of the overall impact it may have on the already fragile economy and the insurance sector.”