The National Insurance Commission has stopped some insurance firms from taking new businesses.
It also placed a limit on the transactions some of them can underwrite based on the level of capital they have.
This followed the continuous challenge which had delayed the enforcement of recapitalisation in the industry.
The Commissioner for Insurance, National Insurance Commission, Mr Sunday Thomas, disclosed this to our correspondent in an interview.
He said the commission observed that the capital of some insurance firms had eroded over time which could hinder their ability to pay claims.
To protect the policyholders, he said NAICOM ordered some insurance firms to divert a substantial part of the proceeds earned from their asset sales to payment of claims.
Thomas said, “We have done a bit of what we said we will do as a first step. Some of them (insurance companies) have been stopped from taking new businesses; and for some of them, we have limited their expenses; we call it regulatory order.
“They cannot expend any amount above the threshold without the approval of the commission, so that will reduce frivolities.”
Thomas added that “And if there is any disposal of assets, about 70 to 80 per cent should go to settlement of claims.
“There are no two companies that are the same, so we treat each company according to its own circumstance.”
While the issue of recapitalisation has stiff opposition in the sector, he said NAICOM was monitoring the activities of the insurance companies and taking proactive measures to ensure that policyholders were protected.
NAICOM had said one of the reasons for introducing the recapitalisation exercise in the industry was to strengthen the performing firms and sieve out the non-performing ones.
It observed that some insurance firms already had liquidity problems and were not meeting their claim obligations.
In a circular to all insurance companies on June 3, 2020, titled, ‘Segmentation of minimum paid-up share capital requirements for insurance companies in Nigeria’, NAICOM mandated underwriters to meet the deadline for the first phase of the recapitalisation exercise, which was slated for December 31, 2020. The final deadline was September 30, 2020.
Life insurance companies were ordered to raise their capital from N2bn to N4bn at the end of the first phase, and N8bn at the end of the second phase.
General insurance companies were ordered to increase their capital from N3bn at the end of the first phase, and N5bn at the end of the second phase.
Composite underwriters were ordered to raise their capital from N5bn to N9bn at the end of the first phase, and to N18bn at the end of the second phase.
The reinsurance firms were ordered to raise their capital from N10bn to N12bn at the end of the first phase, and to N20bn at the final phase.
However, pending litigation by some aggrieved companies allegedly using their shareholders against the commission forced NAICOM to suspend the recapitalisation exercise after the first phase.
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