Insurance companies yesterday got a breather in their efforts to recapitalise their businesses as the National Insurance Commission (NAICOM) yesterday announced the suspension of the exercise, whose deadline expires today.
The commission cited the need to obey the December 21 restrained order by Justice C. J. Aneke of the Lagos Division of the Federal High Court, for its decision.
The commission had directed insurance firms to recapitalise on or before December 31,2020 and later extended it to September 30, 2021.
But the exercise encountered some legal brickwalls as Justice Aneke ordered the suspension of the exercise.
Justice Aneke had restrained NAICOM from taking any further steps in implementing its deadline date for insurance and reinsurance companies to recapitalise.
The judge had delivered the ruling in an ex-parte application brought before the court by the Incorporated Trustees of the Pragmatic Shareholders’ Association of Nigeria.
In the motion, marked FHC/L/CS/1797/2020, filed on December 15, 2020, and 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 further steps in the recapitalisation process in the insurance industry pending the hearing and determination of its motion on notice before the court.
Following the new development, the commission had remained silent on the judgment, keeping stakeholders in the dark regarding its next line of action and whether the recapitalisation timelines still stand.
It was, however, gathered that despite the opposition, some insurance firms had already complied with the directive to inject fresh capital into their respective companies.
NAICOM Head, Corporate Communications and Market Development Department, Mr. Rasaaq Salami, yesterday, said “the issue is in court and there’s an interim order of the court. NAICOM, being a responsible and law-abiding organisation will respect the order of the court.”
The commission had in June extended the deadline issued to insurance operators to raise their minimum paid-up capital to September 2021 from December 31, 2020.
However, the regulator broke the recapitalisation programme into two-phases – mandating insurance firms to provide 50 per cent of the required capital by December 31, while balancing the remaining 50 per cent by September 30, 2021.
Under the proposed capital injection, life insurance firms are required to meet a minimum paid-up capital of N8 billion, from the previous N2 billion, while general insurance companies are required to raise their minimum paid-up capital to N10 billion from N3 billion.
NAICOM also raised the regulatory capital for composite insurance from N5 billion to N18 billion, while it increased the minimum capital of reinsurance businesses from N10 billion to N20 billion.
The House of Representatives had called for the suspension of the proposed recapitalisation of insurance companies and intermediaries.
This followed a unanimous adoption of a motion by Hon. Benjamin Kalu.
According to Kalu, in addition to the negative economic impact of the COVID-19 pandemic, the Nigerian economy was just announced to be officially in a recession, noting that this signified that there will be significant slowdown in economic activities and the liquidity position of both the government and businesses are negatively impacted.
“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 tonnes of liabilities to settle in order to fulfil their obligations so as not to deny the rights of these affected insured persons,” he had said. – Thisday.
