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Chuks Udo Okonta
Insurance operators have opt for risk based capital as against minimum share capital as propounded recently by an investor.
The Chairman United Bank for Africa (UBA) Heirs Holdings Tony Elumelu, had proposed N20 billion capital based for life insurance operation, N30 billion for non-life and N50 billion for composite business.
The President West African Insurance Companies Association (WAICA) and Managing Director Consolidated Hallmark Insurance Plc, Eddie Efekoha, told Inspenonline that though capital is a major resource in business, but it is not the only requirement.
He said capital in insurance is not define and restricted to share capital, adding that in insurance, there are reinsurance capital and retrocessionaire capital, which are capital of partners.
Efekoha submitted that insurance is about spreading risks, adding that even if an insurance firm has huge capital, it wouldn’t be right to take risks all alone because of the capital.
He noted that the function of risk an insurer should retain on its net capital should not be more than five per cent of the shareholders’ fund, stressing that risk based capital is the way to go, as it only requires an insurer to raise capital in line with the business it needs to write.
Past President of African Insurance Organisation (AIO) and Managing Director NEM Insurance Plc Tope Smart, said insurers across the world are moving to risk based capital as against minimum paid capital.
He submitted that while he was the President of AIO, he conducted a research which revealed that insurance practitioners across the world are moving from share capital to risk based capital.
He said the issue of raising paid capital is not necessary as risk based capital is now the trend across the globe.