The National Insurance Commission (NAICOM) yesterday unveiled a new capital model for the insurance industry in Nigeria effective from January 1, 2019. The new risk-based capital structure is divided into three tiers depending on the risk appetite and capital capacity of each operator.
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 general business, the requirement is N9 billion for Tier 1; N4.5 billion for Tier 2 and N3 billion for Tier 3.
And 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.
Mr. Sunday Thomas, the Deputy Commissioner for Insurance, Technical at NAICOM, said the insurance industry cannot continue to operate at present level of capitalisation if it is to contribute meaningfully to economic growth in the country.
Thomas said: “The operating capital has to be tinkered with to optimise the potential of the industry. The adoption of the risk-based capital is here. What we have is a home-grown model. We shall release the transition guidelines on August 3, 2018 to provide more details on the capitalisation initiative.”
Mr. Barineka Thompson, a Director at NAICOM, who made the presentation on behalf of the Commission, said the new capital structure does not extend to reinsurance companies operating in the country for now. He added that the Commission is working on a new policy for reinsurance firms.
The NAICOM director said the insurers Committee meeting of February 15-16, 2018 in Abeokuta, Ogun State unanimously agreed to recapitalise the insurance sector in Nigeria.
It would be recalled that a recapitalisation exercise was last carried out in the insurance industry in 2007.