The National Insurance Commission (NAICOM) has increased the minimum paid-up capital of insurance companies in Nigeria by over 300 percent.
This was contained in a circular released yesterday May 2019 by the Commission and signed by Pius Agboola, the Director, Policy and Regulation Directorate, for the Commissioner of Insurance.
The circular with No. NAICOM/DPR/CIR/25/2019, titled “Minimum paid-up share capital for insurance and reinsurance companies” the minimum paid-up share capital requirement of insurance and reinsurance companies in Nigeria is hereby reviewed as follows: In the new capital base, life insurance companies will now have a minim paid-up capital of N8bn from its previous N2bn, General Insurance companies will now have to recapitalize to N10bn from N3bn, while Composite Insurance companies will now need N18bn to underwrite businesses from the previous N5bn minimum capital.
The new capital base requirement also affected reinsurance companies who will now have to raise their minimum paid-up capital from N10bn to N20bn if they must remain in business.
The circular said that “the new minimum paid-up share capital requirements shall take effect from the commencement date of this circular for new applications while existing insurance and reinsurance companies shall be required to fully comply not later than June 30, 2020.”
In reviewing the paid-up capital, the Commission noted that “in 2005/7, the insurance industry witnessed its last recapitalisation and despite the astronomical increase in value of insured assets, consequent exposure to higher level of insured liabilities and operating costs of insurers, the same capital continue to rule in the insurance industry.” However, the new capital base doesn’t apply to micro-insurance and Takaful insurance companies.