Insurance

Shareholders to seek legal counsel on NAICOM’s new capital for insurance sector

Coordinator Emeritus, Independent Shareholders Association of Nigeria (ISAN) Sir Sunny Nwosu and a shareholder at an event.

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Chuks Udo Okonta

The National Insurance Commission (NAICOM) and shareholders of insurance companies may embark on another rounds of legal battle as the investors have resolved to seek legal counsel on how to handle the new capital regime announced yesterday by the regulator.

NAICOM had increased the minimum paid-up share capital for insurance and reinsurance firms by 300 per cent, thereby making Life Insurance companies to jack-up their capital from N2 billion to N8 billion; general business operators from N3 billion to N10 billion; composite business, N5 billion to N18 billion and reinsurance, N10 billion to N20 billion.

The Coordinator Emeritus, Independent Shareholders Association of Nigeria (ISAN) Sir Sunny Nwosu, told Inspenonline that his group would approach their legal advisers for counsel on how to handle the decision taken by NAICOM.

He noted that insurance companies shares have not be yielding expected returns to shareholders, adding that the order giving by NAICOM to insurers and reinsurers would definitely kill the capital of shareholders.

“We are going to seek the opinion of our legal adviser on this to know the next line of action. We do not know the modalities of this recapitalisation whether it is going to follow the right course, which does not force raising capital on operators without giving them enough time,” he said.

Nwosu noted that recapitalisation goes beyond engaging stakeholders, adding that prior to announcing a new capital base regulators should study the environment.

“If you do not want the ownership structure of these companies diluted, you have to get the recapitalisation tight. This is because, you would not get shareholders who are presently getting two kobo dividends to put their money in this companies. More so, the quantum of shares that would enable these companies meet at least N10 billion would not be serviceable. So, it is an issue of common sense for the regulator to think deeply before taking a decision on recapitalisation,” he added.

NAICOM had in July 2018 announced that the Tier Based Minimum Solvency Capital (TBMSC) exercise to take effect from January 1, 2019, a deadline that some insurance operators, shareholders and other stakeholders resisted.

The decision of the regulator to later shift back the recapitalisation deadline date from January 1, 2019 to October 1, 2018, citing reinsurance treaties which is usually is done in November and December as the major reason for changing the deadline rocked the plan as some parties went to court to challenge it, hence, leading to the announcement by the Commission of the cancellation of the policy in October, 2018.

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