The implementation of Tier-based Minimum Solvency Capital policy for insurance companies operating in Nigeria has been suspended by the industry’s regulator, National Insurance Commission (NAICOM).
This information was made known by NAICOM in a circular to all insurance institutions titled Update on the implementation of the Tier-based Minimum Solvency Capital policy for insurance companies in Nigeria.
The policy, also known as the recapitalisation of the industry, put insurance firms into three categories based on their capital base.
Tier 1 insurance companies are required to have minimum capital base of N9 billion for general insurance and N6 billion for life insurance, implying a composite capital base of N15 billion.
Tier 2 companies are divided into two categories, with N4.5 billion minimum capital base for general insurance and N3 billion for life assurance. Thus a composite insurance-general and life insurance, will be required to have minimum capital base of N7.5 billion.
Tier 3 companies will continue to operate on the existing minimum capital base of N3 billion for general insurance and N2 billion for life insurance, implying a composite capital base of N5 billion for a composite tier 3 insurance company.
Under the risk-based capitalisation approach, tier 1 companies will be able to undertake all risks including annuity and high-level special risks such as energy and aviation risks. Tier 2 companies will undertake retail insurance as prescribed under Tier 1, including commercial and industrial risks and group life assurance while tier 3 companies will only be able to write retail insurance only including micro insurance, motor, fire, agriculture, compulsory liability insurances, individual life, health and miscellaneous insurance.
The new scheme was to take effect this month, but the regulatory agency has asked insurance companies to continue with the subsisting regulatory framework prior to the circular.
This, NAICOM explained, was due to a court order directing the regulator to suspend implementation of the policy.
Some stakeholders in the sector had approached the court to halt the scheme, claiming the timing was not right.
Justice Muslim Hassan had in September 2018, gave the order in a class action brought by the shareholders restraining NAICOM from enforcing the TBMSC policy, pending the expiration of the 30-day pre-action notice dated September 4, 2018.
In the circular, NAICOM said. “In compliance with the extant rules and injunction issued by the Federal High Court regarding the tier-based minimum solvency capital framework, which was to take effect from October 1, 2018, the commission wishes to clarify that the status quo will be maintained and insurers are to continue to operate on the subsisting regulatory framework prior to the circular.”