*NAICOM hails passage
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Chuks Udo Okonta
The Senate has passed the Insurance Consolidated Bill which seeks to increase the minimum capital for non-life insurance companies operating in Nigeria from N3 billion to N15 billion; life, N2 billion to N10 billion and reinsurance, N10 billion to N35 billion.
The Bill was sponsored by Chairman of the Senate Committee on Banking, Insurance and other Financial Institutions Adetokunbo Abiru.
The Senate passed the bill after considering the committee’s report clause by clause at the Committee of the Whole, chaired by the Deputy Senate President, Barau Jibrin.
It was passed after most lawmakers supported it when Jibrin put it to a voice vote.
The bill which passage has been commended by the National Insurance Commission (NAICOM) seeks to regulate the insurance business in Nigeria by consolidating various existing legislations such as the Insurance Act, 2003; the Marine Insurance Act; Motor Vehicles (Third Party Insurance) Act; the National Insurance Corporation of Nigeria Act; and the Nigeria Reinsurance Corporation Act.
Section 15 of the bill states that;
(1)A person shall not carry on insurance business in Nigeria unless the insurer has and maintains the minimum capital, in the case of (a)non-life insurance business, the higher of(i) N15,000,000,000.00 or
(ii)risk-based capital determined by the commission (b)life assurance business, the higher of (i)N10,000,000,000.00 or
(ii) risk-based capital determined by the Commission.
( c) reinsurance business, the higher of (i)N35,000,000,000.00 and (ii) risk-based capital determined by the Commission.
While presenting the committee’s report, Abiru said the increments were necessary because of the depreciation in the value of Nigerian currency.
The lawmaker also explained that the increase was because of the Finance Act 2022, which redefined the composition of the capital, international competitiveness and AfCFTA.
He also emphasised that the provisions of the current insurance law do not resonate with current realities and cannot address contemporary challenges in the insurance industry.
“They do not resonate with the current dynamics and evolving needs of Nigeria’s insurance industry. All these legislations have surpassed the three-decade mark and the lack of issues that can adequately address contemporary challenges and support growth and innovation in this leading industry.
“These legal obsolescence have led to some of the regulatory inefficiencies in the insurance industry, and these have also hampered the industry’s ability to successfully compete on a global level,” Abiru said.
He assured that the bill’s new provisions would benefit the insurance industry and develop the country’s economy.
“Another objective is that it will ensure that the insurance sector contributes positively to the principal objectives of the financial system in order to make Nigeria Africa’s financial hub and one of the 20 largest economies in the world,” he said.
Ondo South Senator Jimoh Ibrahim expressed concerns that the increment of insurance capital will lead to the extinction of insurance companies in the country.
“We only have one re-insurance company, and now increasing the capital. As a matter of fact, 20 per cent of that will be deposited in CBN forever. This increase will lead to their death,” he argued.
The senator, who owned the Nicon Insurance Ltd and Nigeria Reinsurance Corporation until they were taken over by AMCON in 2021 over an alleged debt, recommended that the current capital requirement of N2 billion for insurance companies be retained.
However, Ibrahim’s proposal was neither seconded nor supported when the deputy senate president put it to vote. Instead, the lawmakers voted to retain the committee’s recommendations.
With the passage, the bill will now be transmitted to the House of Representatives for concurrence. If the lower House concurs with the provisions, it will then be transmitted to the country’s president for assent. If not, both chambers will set up a committee to harmonise their positions before transmitting it to the president.
Reacting to the passage of the bill,
NAICOM said it warmly welcomed the passage of the new Insurance Consolidated Bill by the Upper Chamber of the National Assembly and expressed optimistic that the legislation would unlock the growth, prosperity and potentials of the insurance sector.
The insurance industry regulator noted that the passage of the Bill has marked a significant milestone in the country’s efforts to revamp the insurance industry after nearly two decades.
The Commission believes that the Bill is a game changer for the Nigeria’s insurance industry and is going to have high positive impact on the contribution of insurance sector to the country’s GDP and economy as a whole.
By consolidating existing insurance laws, the new legislation marks a new era in the ongoing efforts to strengthen the Nigeria’s insurance industry.
The bill provides a comprehensive framework for regulating all types of insurance businesses and ensuring a more robust and effective industry.
Passage of the Bill marks a significant triumph for Nigeria’s insurance industry, tackling the long-standing challenge of low insurance penetration in the country.
The new legislation addresses the industry’s need for a more robust legal and regulatory framework, enabling it to compete favorably in the African insurance market and globally.
The newly passed bill introduces several pivotal provisions aimed at fortifying Nigeria’s insurance industry.
Key highlights of the legislation include:Enhanced Capital Requirements: New minimum capital requirements for insurance companies, ensuring they are adequately capitalized to underwrite risks and protect policyholders.
Risk-Based Supervision: Consolidation of the risk-based approach to supervision, enabling regulators to more effectively monitor and manage risks within the industry.
Strengthened Consumer Protection: Improved consumer protection requirements, safeguarding the interests of policyholders and promoting transparency and fairness in insurance practices.
Streamlined Regulatory Framework: An enhanced regulatory framework, providing clarity and consistency in the regulation of insurance businesses, and facilitating a more efficient and effective supervisory process.
This achievement comes after years of operating with laws that have failed to keep pace with the country’s evolving economic landscape. Unlike other sectors that have undergone multiple phases of legislative reforms to reflect current economic realities.
