Major transformation taking place in insurance industry
There is major transformation taking place in the nation’s insurance industry, which when completed will position the industry for greater growth and competitiveness.
Over 70 percent of the companies are embarking on raising fresh funds either through their existing and new shareholders or are ceiling big deals with foreign investors for new capital, which target is to play in the top Tier of the market in line with regulatory reclassification exercise already announced for the industry.
Though there is a pending court order that restrained the National Insurance Commission (NAICOM) from going on with its proposed enforcement deadline for reclassification of the operating companies, firms were already doing themselves good to take position while the court case lasts.
An operator told BusinessDay “Look, as company that wants to survive the regime, you can’t afford to fold your hands and watch developments; you must do something and wait for the time”.
We are raising new capital and we have communicated our regulator the Tier level we want to play, and we have given them our timetable, so we are keeping to our timetable.
Yes, there is a court order instituted by group of owners of the companies. But, that will not stop a regulator from regulating the business, which is its core function, the CEO.
But I can tell you, what NAICOM is doing is in the best interest of the Company and when it is concluded, the industry will be better for it, the CEO who preferred not to be mentioned said.
In the new Tier-Based Minimum Solvency Capital, Tier 3 companies are those that falls within existing paid up capitals of N2 billion for life business; N3 billion for non-life business and N5 billion for composite business.
Companies in this category will be limited to underwrite only risks in life business in the following areas – Individual Life, Health Insurance, Miscellaneous Insurances; while for non-life they will be limited to underwrite risks in these areas – Fire, Motor, General Accident, Engineering (only classes covered by compulsory insurance), Agriculture and Miscellaneous Insurances.
Tier 2 companies are those whose paid up capital has increased by 50 percent above the existing minimum capital.
For life business, their paid up capital will be N3 billion and they are to underwrite all Tier 3 risks and Group Life Assurance (GLA); while for non-life, their paid –up capital base will be N4.5 billion and they will underwrite all Tier 3 risks, Engineering (All inclusive), Marine, Bonds Credit Guarantee and Suretyship Insurances.
Tier 1 companies are those whose paid up capital has increased by 200 percent, above the existing minimum requirement. Life companies in this category will have capital of N6 billion, and will underwrite all Tier 2 risks and Annuity. While for non-life business, the paid up capital will be N9 billion, and will underwrite all Tier 2 risks and Oil & Gas (oil related projects, exploration & production), and Aviation Insurances.
Composite companies in Tier3 will maintain N5 billion; Trier 2 N7.5 billion and Tier 1 will have N15 billion.
Barineka Thompson, director, Supervision, NAICOM had stated at the announcement of the scheme that the TBMSC Model – is a regulatory model designed for the application of proportionate solvency capital that support the nature, scale, complexity and risk profile of the business conducted by insurers, stressing that classification of business according to the present level of capital that an insurer possesses in relation to the risks that the capital can effectively be deployed to.
He said the policy will enable soundness and profitability of insurers through optimal utilization of capital; encourage insurers to focus on the area of their strengths, encourage innovation and deepen market penetration, build investors’ and public confidence in the industry.
Other benefits according to him, include, creating capacity for bridging insurance gap, optimizing local retention and minimizing capital flight; limiting significant systemic risks and building confidence in the insurance industry; supports the stability of the financial system and increase insurance contribution to the nation’s Gross Domestic Product.
Modestus Anaesoronye