Nigeria’s insurance sector may witness another recapitalisation exercise or mergers soon, as the National Insurance Commission, NAICOM, plans to increase the capital base to about N15billion.
Currently,the minimum capital requirement for the three tiers: life insurance, non-life and composite is N2 billion, N3billion and N5 billion respectively. The last recapitalisation was in 2005.
The commission requires the sector to either recapitalise or merge to meet the new capital requirement.
Insurance contributes about 0.4% to Nigeria’s GDP.
There have been controversies over the tier-based recapitalisation exercise as stakeholders instituted a court action against NAICOM over its proposed implementation of the minimum solvency capital base, slated for last September.
The commissioner for Insurance, Mohammed Kari, says the recapitalisation is to shore the sector from a repeat of the global financial crisis that hit the sector in 2008, with heavy consequences on insurers. The recapitalisation will boost insurers’ profitability, support the stability of the financial system and increase insurance contribution to the nation’s Gross Domestic Product.