Insurance firms with inadequate shareholders’ funds have commenced moves to raise additional capital in preparation for the next phase of implementation of the Risk Based Supervision (RBS) by the National Insurance Commission, NAICOM. NAICOM plans to move to the next phase of implementation of the RBS which is determining the capital requirements for underwriting risks, by first quarter of 2018.
Hence, to remain afloat, some firms are already scrambling for funds to enable them remain relevant when the RBS kicks off.
It would be recalled that in the last insurance industry recapitalization, Non-Life insurance firms were mandated to raise their shareholders’ fund to N3 billion; life insurance operators to N2 billion, while composite companies increased theirs to N5 billion and reinsurers to N10 billion.
According to the Commissioner for Insurance, Mohammed Kari, the new phase of underwriting would distinguish big and fringe players.
“Our legislation had structured the industry into life, general and miscellaneous. So, if you are licenced to do general, it means that with N3 billion you can attempt to insure petroleum refinery or you can claim the right to insure an Airline, which is not right if you look at the foundation of insurance.
“This is because, to be able to hold a risk, you must have enough asset base to cover the risk. So, risk based is being able to identify what is your financial capability. If your financial capability does not guarantee you to insure oil refinery or airline, you would not be allowed to do so.
“Your financial ability may be to insure a Keke NAPEP, then you would be a specialist in Keke NAPEP insurance. That is what risk based is going to be. It is going to first of all require that we review and see whether the minimum capital requirement is adequate. If it is not, we would require additional capital to meet that minimum. But if it is okay, we would just require the classification of companies’ assets plus the extra needed to get into the class of business one wants to undertake,” he said.