New capital Base for Underwriters Effective Jan’19
The National Insurance Commission (NAICOM) has set a Tier-Based Minimum Solvency Capital (TBMSC) model that allows small underwriting firms to operate alongside the bigger ones in the market and will come into effect in January 2019
The new model was adopted by the commission having taken into consideration the economic situation and the different levels of financial capabilities of insurance companies in the country.
The new has been communicated to chief executives of insurance underwriting firms at a meeting of the Insurance Committee in Lagos.
The TBMSC structure is an added measure to the ongoing implementation of the Risk-Based Supervision (RBS) programme currently being implemented in the insurance market.
Under the newly adopted model, the market is graduated into three units and the players in the top bracket regarded as Tier-One are expected to shore up their capitalization to N15 billion representing 200 percent increase if they are to operate the composite form of business.
Such insurers will be allowed to handle individual life, health insurance, miscellaneous insurance and annuity for life and Non-Life comprising fire.
Others are Motor, general accident, Engineering, agriculture, miscellaneous insurance, Marine, Bonds Credit Guarantees & Suretyship, Oil and Gas (oil related projects, exploration and production) and Aviation.
Life insurance in this cadre will raise its capitalization from the current N2 billion to N6 billion and the Non-Life in this category will move from the current N3 billion to N9 billion.
The Director Supervision, NAICOM, Barineka Thompson, at a briefing after the meeting of the insurance committee said that composite companies in Tier 2 cadre are to look for N7.5 billion to operate within this bracket.
According to him, such companies will under its Life branch underwrite individual life, health insurance, miscellaneous insurance and Group Life insurance.
The Non-Life insurance under the Tier 2 covers Fire, motor, general accident, Engineering, agriculture and miscellaneous, Marine, Bonds Credit Guarantee and Suretyship.
A life company that decides to play in the Tier 2 cadre is to grow its capitalization to N3 billion while a Non-Life Underwriter that desire to play in this cadre is to look for N4.5 billion.
The last group is the Tier 3 which currently is the capitalization in the industry.
Companies that lack the financial capability to grow their capitalization to the either of Tier 1 or Tier 2 are expected to continue to play in this cadre according to Barineka Thompson.
He noted that the failure of some insurers to honour contractual commitments to the insured and other stakeholders as well as the need to save from extinction, the market which has suffered recession as well as the 2008 global financial crisis has made the development imperative.
This new model Specifies capital requirement for each Tier Levels, based on Risk classification for each Tiers but with no mandatory injection of fresh capital fund by insurers, adding that the new model will witness no cancellation of license of any operator but will subject them to solvency control levels.
