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The last successful recapitalisation exercise occurred in 2005 and the industry has been operating with the same minimum capital base till date, despite the economic changes and risk dynamics. Although timing has been a major constraint in the two botched exercise, but given the economic pitfalls, observers are insisting on the recapitalisation.
According to the House of Representatives, “The suspension is expected to last for six months, from January to June 2021 and is necessary to give the insurance operators soft landing, as well as cushion the effects of COVID-19 and other unforeseen circumstances they might have suffered. The motion, marked FHC/L/CS/1797/2020 and filed on December 15, 2020, was moved on behalf of the group by their lawyer, I.C. Ifedora.
The suspension then, it was learnt, may not be unconnected to the court case instituted by insurance shareholders under the auspices of the Insurance Shareholders Association of Nigeria , stopping NAICOM from commencing the implementation of the Tier-Based Minimum Solvency Capital model in the insurance sector.
Under the previous exercise, tier one has the highest capital base while tier three has the minimum capital base. The managing director, Lancelot Ventures Limited, Mr. Adebayo Adeleke, who is also a prominent member of Independent Shareholders Association of Nigeria , charged insurance operators not to relent as the suspension didn’t translate to the cancellation of the exercise, stressing that the court case could turn in favour of NAICOM.
They described it as the right capital model for the insurance industry in a bid to emulate other developed economies, noting that the adoption of this model signalled that the Nigerian Insurance market now operates within International best practice. This, they believe, will equally reposition the industry for accelerated growth and development.
When the bill is eventually signed into law in line with this proposal, he said, it will lay to rest, the contentious issue of the definition of capital, which has been a major point of the association’s engagements with the regulatory body during the ongoing recapitalisation exercise.