…attributes move to economic recession and Covid-19
Members of the House of Representatives on Tuesday mandated NAICOM to suspend the proposed 50percent recapitalization of insurance companies due to the effects of Covid 19 and the economic recession in Nigeria.
The House disturbed by the effects of Covid-19 and the recessed economy moved that the recapitalisation should be jettisoned for now.
The House unanimously resolved that the exercise should be suspended pending when the economy picks up.
This was sequel to a motion promoted by Hon Ben Kalu, (APC -Abia) entitled ‘Need to Suspend the Proposed Recapitalisation of Insurance Companies, Insurance Intermediaries and Other Players in the Insurance Sector, especially in View of the COVID – 19 Pandemic and the Economic Recession.
Kalu in his submission said that” the National Insurance Commission (NAICOM) is established by the National Insurance Commission Act 1997 to act as the primary regulator for the insurance sector.
“In addition, the Insurance Act 2003, particularly, section 9(1) and (4) empowers NAICOM to prescribe minimum paid up share capital for insurance companies and intermediaries.
He recalled that NAICOM issued a Circular No. NAICOM /DPR/CIR/25/2019 dated May 20, 2019 on the minimum paid-up share capital requirement for insurance and reinsurance companies. This Circular effectively increased the minimum paid up share capital for insurance and reinsurance companies.
“The original deadlines were 29 May 2019 for new companies, while, 30 June 2020 was to apply to existing companies.
“The changes to the minimum paid up share capital were as follows – Life Insurance N2 billion to N8 billion, General N3 billion to N10 billion, Composite N5 billion to N18 billion and Reinsurance N10 billion to N20 billion. This was later moved to 31 December 2020.
Further notes that as a result of the COVID – 19 pandemic, the deadline was moved by NAICOM, vide Circular NAICOM/DPR/CIR/25-04/2020 and dated 3 June 2020. In the Circular, NAICOM introduced a two phased recapitalisation programmes, wherein, 50 percent of the minimum paid up share capital for insurance companies must be met by 31 December 2020 and 60 percent for reinsurance companies must be met on the same date.
“Total compliance with the total minimum capital requirement must be achieved on or before 30 September 2021.
Recalls that in addition to the negative economic impact of the COVID – 19 pandemic, the Nigerian economy was just announced to be officially in a recession.
This signifies that there will be significant slowdown in economic activities and the liquidity position of both the government and businesses are seriously impacted, albeit, negatively.
He noted that in times as this, the best move by the government and by regulators is to push more liquidity into the economy in a bid to stimulate economic activities, encourage spending and prevent job losses as well as support the indigenous businesses in the country.
“This is pertinent because in addition to the impact of the COVID-19 pandemic, the industry was also affected by the aftermath of the ENDSARS protest in which several insured properties were affected and to this effect, most of these insurance companies have tons of liabilities to settle in order to fulfil their obligations so as not to deny the rights of these affected insured persons.
Notes that these are the types of fiscal, monetary and regulatory approaches that are being adopted in most countries.
“Hence, it may not be suitable at this time for NAICOM to even proceed with its planned phased recapitalization progrmame because of the overall impact it may have on the already fragile economy and the insurance sector.
Concerned that if NAICOM is allowed to proceed with its programme as planned, it could negatively affect the economy and slow down the recovery process.
The House committee led by Hon Darlington Nwokicha had earlier met and deliberated on the issue before it was debated by the House during plenary on Tuesday.