Amid the ongoing debate about increasing the minimum capital for insurance and reinsurance companies, operators have suggested the registration of more reinsurance firms to help retain underwriting funds in the country.
It has been reported that this is one of the proposals presented by the Nigerian Insurers Association (NIA) to the National Insurance Commission (NAICOM) as they discuss achieving a useful minimum capital for insurance and reinsurance operations.
A top insurance practitioner who is in know of the ongoing engagements between the NIA and NAICOM told this medium that the NIA believes insurance companies do not need excessive capital to operate, adding that insurance business entails risk sharing, hence there should be more local reinsurance firms to help absolve the risks and retain the premium at home.
The Chairman of NIA Kunle Ahmed, has said Nigeria’s current capital requirements were relatively competitive within Africa, but the market size in other countries far surpasses it.
According to him, ‘’South Africa’s market is approximately $50 billion per capital Kenya’s is over $1 billion, while Nigeria’s non-life business is only $0.63 billion and life business is $0.43 billion.
“This means we have significant capital chasing limited transactions,” he submitted.
He said the Nigerian insurance sector was not large enough to support the proposed increases in capital requirement without significant adverse effects.
“Insurance is an international business, and we need to consider what is obtainable in other countries, even within Africa,” Ahmed posited.
He cited Morocco, with a capital requirement of $5 million for life and non-life businesses, while Kenya’s requirements are $3.8 million for life and $2.3 million for non-life. He said South Africa has the least capital requirements but has one of the biggest markets.
Ahmed noted that capital alone does not determine the capacity of an organisation or company.
“I agree that it determines your retention, but it’s not the single determinant of your capacity. What we risk is that we’re going to have insurance companies that are not deepening insurance business in Nigeria, but are just sitting down and investing the money that they have in other things. I believe that we should focus a lot more on deepening insurance in Nigeria”, he said.
The NIA Chairman contrary to the N25 billion for non-life; N15 billion for life and N40 billion for reinsurance proposed in the Bill, proposed a more balanced approach, recommending a minimum capital requirement of N10 billion for non-life and N8 billion for life insurance, which would make Nigeria the most capitalised insurance market in Africa. “Our focus should be on deepening insurance in Nigeria,” he said.
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