The National Insurance Commission (NAICOM) has suspended the insurance industry recapitalisation exercise for the second time in three years following a court order directing the regulatory body to do so.
Few stakeholders in the industry had filed suits asking the court to stop NAICOM from proceeding with the ongoing recapitalisation exercise.
The scenario was similar to what happened in 2018 when some distressed shareholders took the commission to court to stop the then tier-based recapitalisation exercise under the then Commissioner for Insurance, Alhaji Mohammed Kari.
December 31, 2020, was the deadline for underwriting companies to raise 50 per cent of the new capital while the remaining 50 per cent would have been met in September 2021 if the regulatory body had not suspended the exercise.
Confirming the development, NAICOM’s spokesperson, Rasaaq Salami, said: “You are aware that the issue is in court and that there is an interim order of the court. NAICOM, being a responsible and law-abiding organisation, respects the order of the court.”
Earlier in December, the House of Representatives had ordered the discontinuation of the recapitalisation exercise and had written to NAICOM in that regard.
Stating that it was worried about the impact of the latest economic challenges such as the COVID-19 Pandemic and #EndSARS protest, the House of Representatives passed a resolution demanding that the NAICOM suspend its planned December 31, 2020, mandatory deadline for the first phase of 50 per cent of the new paid-up share capital for insurance and reinsurance companies
The lower said: “The suspension is expected to last for six months from January – June 2021 and is necessary to give the insurance operators soft landing as well as cushion the effects of Covid-19 and other unforeseen circumstances they might have suffered.”
Two shareholder groups have also contested the recapitalisation exercise and had gone to court to challenge the process.
A Federal High Court sitting in Lagos had temporarily stopped NAICOM from taking any further steps in effecting its recapitalisation deadline against insurance and reinsurance companies.
The motion marked FHC/L/CS/1797/2020 and filed on December 15, 2020, was moved on behalf of the group by their lawyer, I.C. Ifedora.
The applicant prayed the court for an order of interim injunction restraining the defendant and its agents from taking any further steps in the recapitalisation process in the insurance industry, pending the hearing and determination of its motion on notice already filed before the court.
Under the recapitalisation exercise, NAICOM had mandated life insurance firms to meet a minimum paid-up capital of N8 billion, up from N2 billion while general insurance companies are expected to increase their paid-up capital to N10 billion, from the earlier N3 billion.
Composite insurance (life and non-life operators) were asked to recapitalise to the tune of N18 billion as against the previous N5 billion while reinsurance businesses are now required to have a minimum capital of N20 billion, from N10 billion obtainable in the past.
