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Chuks Udo Okonta
The National Insurance Commission (NAICOM) has cleared some ambiguities around the recapitalisation and gave insurers and reinsurers on or before Tuesday, August 20, 2019 to submit their recapitalisation plans.
NAICOM stated this in a circular numbered, NAICOM/DPR/CIR/25 – 02/2019; dated July 23, 2019; entitled; Re: Minimum Paid Up Share Capital Policy for Insurance and Reinsurance Companies; signed by the Director, Policy & Regulation Directorate, NAICOM, Pius Agboola and sent to all insurance companies, adding that the circular is in furtherance to the circular dated May 20, 2019.
NAICOM stated that the recapitalisation plan should include among others; capital status of the companies as at the last audited financial statements; board resolution on how to comply with the directives; detailed action plan on how the funds for the recapitalisation are to be sourced with timeline and deliverables; companies intending to seek funds from the capital market are required to submit their plan of action on a file-and-use basis and companies that intend to merge or acquire another should submit their proposal after which they must comply with Section 30 and 31 of the Insurance Act 2003.
The commission noted that after the submission is made, it shall review and provide response on the submitted plans on or before September 17, 2019, adding that the review may require meeting the board and management of each of the inasurance company on its recapitalisation plan.
The insurance industry regulator said it is engaging other regulatory bodies for possible palliatives in additional to those it is has considered.
It also maintained that in furtherance to the circular dated May 20, 2019, the minimum paid up share capital shall be through any or a combination of the following; existing paid up share capital; cash payment for new shares issued; retained earnings – capitalisation of u distributed profit; payment in kind (other than by way of cash) for new shares issues such as properties; treasury bills; shares; bond which must be converted to cash not later than three months to the deadline for recapitalisation and share premium. NAICOM added that the items listed above can be achieved through merger and acquisition.
NAICOM said cash payment for new shares issued shall be deposited in the escrow account with the Central Bank of Nigeria (CBN), adding that deposited funds shall be released not later than 30 days after confirmation and issuance of a new licence.
The commission posited that the shareholders’ fund as at the last date of recapitalisation for existing insurance/reinsurance companies shall not be less than the required minimum paid-up share capital.
It said payment of statutory deposit shall be in accordance with the Insurance Act 2003 and shall be made not later than 30 days to the deadline for the recapitalisation, stressing that all mergers and acquisitions shall be concluded not later than 60 days to the deadline for the recapitalisation.