Market shapes out on new capital regime
Series of activities lined up this year, both at industry level as well as individual companies to drive penetration and growth in the insurance sector are shrinking out. This is following the recent regulatory pronouncement by the National Insurance Commission (NAICOM) on new capital regime (Tier-solvency capital levels), expected to commence January 1, 2019.
A lot of attention is shifting to understanding the new development and strategizing on how to remain relevant in the business.
Now, issues of rebranding that was the talk in town, retail development through micro insurance, product distribution through and budgets for human capital development are getting less attention, analysts have said.
Across board, most of the CEO’s are confronted with getting their firms play in top Tier, with companies having emergency board meetings to review their situation and also look at available options – new capital raise, mergers or acquisition.
Insurance regulator, the National Insurance Commission (NAICOM) has introduced new capital requirement for underwriting companies in Nigeria.
The new capital requirement classified in three tier levels, which will commence 1st January 2019, is a compliment of the industry risk based supervision framework started in 2009, targeted at making the insurance industry optmise its potential and contribute maximally to the Nigerian economy.
In the new Tier-Based Minimum Solvency Capital released by NAICOM in Lagos yesterday, companies will be classified based on their 2017 financial accounts. In this vein, 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.
Modestus Anaesoronye