NAICOM engages insurance directors over Tier-based capitalization

For the whole of this week, the insurance industry regulator, the National Insurance Commission (NAICOM), will engage with the directors of insurance companies on the new Tier-based solvency capital introduced in the sector.

BusinessDay findings show that NAICOM has allocated days beginning from Monday through Friday, when the different companies board of directors will meet the commission.

According an industry source, the meeting will enable NAICOM explain to the directors the task ahead and what their roles will be in the insurance industry?

The meeting is taking place in Lagos, with the meeting structured in batches.

The new capital requirement, which will commence 1st January 2019, will require insurance companies willing to play big in the market to either raise fresh capital, embark on mergers and acquisition for higher Tier-levels, or remain with low level capitals and underwrite small premium risks.

This development analysts say will open up the market for dip pocket investors, as companies operating currently with low capitals will welcome new funds to remain relevant and underwrite big ticket risks in group life, annuity, oil, gas and aviation.

Under the new capitalisation structure, life insurance firms need a capital level of N6 billion for Tier 1; N3 billion for Tier 2 and N2 billion for Tier 3: For non-life business, the requirement is N9 billion for Tier 1; N4.5 billion for Tier 2 and N3 billion for Tier 3. While for composite companies (combination of life and general business), the new capital requirement is N15 billion for Tier 1; N7.5 billion for Tier 2 and N5 billion for Tier 3.

The recapitalisation according to the Commission will also open doors for fresh licensing to investors willing to play in the higher Tier 1 capital levels. New license was issued eight years ago and FBNinsurance was the last license issued by the regulator.