The House of Representatives on Tuesday called for the suspension of the proposed recapitalisation of insurance companies and intermediaries in the country.
This followed the unanimous adoption of a motion moved by Rep. Benjamin Kalu (APC-Abia) at the plenary.
Kalu said that the National Insurance Commission (NAICOM) was established by the National Insurance Commission Act 1997 as the primary regulator for the insurance sector.
He said that the Insurance Act of 2003 (as amended), particularly Section 9(1) and (4), empowered NAICOM to prescribe minimum paid-up share capital for insurance companies and intermediaries.
He recalled that NAICOM once issued a circular, NAICOM /DPR/CIR/25/2019, dated May 20, 2019, on the minimum paid-up share capital requirement for insurance and reinsurance companies.
The lawmaker said that the circular effectively increased the minimum paid-up share capital for insurance and reinsurance companies.
Kalu said that the original deadline for compliance was May 29, 2019 for new companies, while, June 30, 2020 was to apply to existing companies.
“The changes to the minimum paid-up share capital were as follows: Life Insurance, N2 billion to N8 billion; General Insurance, N3 billion to N10 billion; Composite Insurance, N5 billion to N18 billion; and Reinsurance N10 billion to N20 billion.
“The deadlines to recapitalise were later shifted to December 2020.
“As a result of the COVID-19 pandemic, the deadlines were moved by NAICOM via Circular, NAICOM/DPR/CIR/25-04/2020 and dated June 3.
“In the circular, NAICOM introduced a two-phased recapitalisation programmes, wherein 50 per cent of the minimum paid-up share capital for insurance companies must be met by Dec. 31, 2020 and 60 per cent for reinsurance companies must be met on the same date.
“Total compliance with the total minimum capital requirement must be achieved on or before Sept. 20, 2021,” he said.
Kalu said that in addition to the negative economic impact of the COVID-19 pandemic, the Nigerian economy was just announced to be officially in a recession.
According to him, this signifies that there will be significant slowdown in economic activities and the liquidity positions of both the government and businesses are seriously impacted, albeit, negatively.
“In times as this, the best move by the government and regulators is to push more liquidity into the economy in a bid to stimulate economic activities, encourage spending and prevent job losses as well as support the indigenous businesses in the country.
“This is pertinent because in addition to the impact of the COVID-19 pandemic, the industry was also affected by the aftermath of the #EndSARS protests, in which several insured properties were affected.
“To this effect, most of these insurance companies have tons of liabilities to settle in order to fulfil their obligations, so as not to deny the rights of these affected insured persons,” he said.
Kalu said it may not be suitable at this time for NAICOM to even proceed with its planned phased recapitalisation programme because of the overall impact on the already fragile economy and the insurance sector.
He said that if NAICOM was allowed to proceed with its programme as planned, it could negatively affect the economy and slow down the recovery process.
The House, therefore, urged NIACOM to postpone the proposed Dec. 31, 2020 deadline for the first phase for six months, with effect from January 2021.
In his ruling, the Deputy Speaker of the House, Rep. Ahmed Wase, mandated the House Committee on Commerce to ensure compliance with the House decisions.