We’ve Not Set Mandatory Recapitalisation, But Restrict Operators To Financial Capability, NAICOM

***Says TBMSC Provides Shock Absorbers For Insurance Sector Against Financial Crisis

By CLEMENT NWOJI, Abuja

The National Insurance Commission (NAICOM), has explained that the newly introduced Tier-Based Minimum Solvency Capital (TBMSC) in the insurance industry does not compel recapitalisation of any insurance company.

Instead, the Commission said the (TBMSC) policy mandatoryly structured insurance companies to operate and handle certain classes of businesses that fall within its financial solvency margin as specified by the Commission.

The Commissioner for Insurance, Mohammed Kari, who gave the explanations, however said that much depends on the board of directors of respective insurance companies to determine which of the Tiers they want their companies to belong to by ensuring that they shore up their company’s capital to meet up with the prescribed minimum capital by the Commission in the TBMSC policy.

Kari spoke against the backdrop of concerns raised by insurance operators resisting the TBMSC policy introduced by the Commission in July, 2018, targeted at repositioning the insurance sector.

He spoke while presenting an address at the 2018 Seminar for Insurance Correspondents which theme was “‘Achieving a seamless implementation of the TBMSC policy in Nigeria” design to enlighten stakeholders on the relevance of the policy in equipping insurance companies against any financial crisis.

Through the TBMSC, the Commission had classified insurance companies into three tiers and specified the minimum solvency capital for each tier. Thus, for Life Companies, Tier one, Tier Two and Tier three, have minimum solvency capital of N6 billion, N3 billion and N2 billion, respectively. For Non-life, Tier one, Tier two and Tier three, the minimum solvency capital is N9 billion, N4.5 billion and N3 billion, respectively. While for Composite companies, Tier one, Tier two and Tier Three, has N5 billion, N7.5 billion and N15 billion as its respective minimum solvency capital.

The Commissioner for Insurance further said by the policy, NAICOM is insisting that every insurance company should handle businesses within its financial capability.

Kari noted that what it has achieved through the policy was to introduce it to the public and formalise what it has been doing in the past by restricting companies from undertaking certain class of business that is beyond its financial capability.

He said for the past 13 years since 2005 when the last recapitalisation of the insurance companies was done, noting again has been done affecting the capital base of the insurance companies.

He regretted that it has been the convention of the industry to resist change but that this convention has kept the sector backwards.

“It is better, until we accept the reality, we are not going to catch up with other sectors of the Nigerian economy”, he said.

Kari maintained that the commission is going ahead with the policy, even despite the pending suit against NAICOM, which he declined to comment on, saying that the commission has not been served the notice.

While pointing out that the TBMSC policy meant well for the sector and shield the industry from future financial crisis, he observed that all through history, no regulator had been stop from implementing regulation through litigation even though it may create hiccups.

According to the Commissioner for Insurance, “This policy in our opinion, will guide them (operators) to consolidate what we have done in the code of governance, what we have in the policies and guidelines that we issued, to ensure that in Nigerian economy, that at least, the insurance sector does not suffer when the next financial crisis will come because it will come.

” When it comes, we want to make sure that our operators and the industry have some cushion and shock absorbers and this policy is what will make it survive it”

On his part, the NAICOM Director (Supervision), Barineka Thompson, while making comprehensive presentation on “Implementation of the Tier-Based Minimum Solvency Capital Policy in Nigeria”, revealed that the policy is homegrown.

He observed that after the last recapitalisation in 2005, most insurance companies have not been able to grow their capital beyond what was prescribed for the respective class of insurance companies.

Barineka, therefore maintained that the commission had no option than to device policies that would move the sector forward.