From N10bn to N45bn: Senate Mandates Higher Capital Requirements for Insurance Companies
- The Nigerian Senate has passed a bill raising the minimum capital base for insurance companies operating in the country
- The new bill raises the capital requirements to N45bn, N15bn, and N25bn for reinsurance companies, life insurance companies and general businesses, respectively
- The approved bill also increases the fine penalty on unlicensed insurance companies operating from N250k to N25 million
The Nigerian Senate has passed the Insurance Reform Bill 2024 through the third reading, approving, among other things, a raise in the minimum capital requirement for insurance companies in Nigeria.
Thus, the capital requirement for reinsurance businesses has moved from N10 billion to N45 billion, while the requirement for life insurance companies moved from N2 billion to N15 billion, and general businesses raised from N3 billion to N25 billion.
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New capital requirements for insurance companies
Speaking on the bill, Senate Committee Chairman on Banking, Insurance and Other Financial Institutions Mukhail Abiru noted that it seeks to consolidate and update past legislation on insurance to suit the industry's modern dynamics and needs.
BusinessDay reported that this bill would make past legislation, such as the Marine Insurance Act, the Nigerian Reinsurance Act, the Insurance Act 2003, and the National Insurance Corporation Act, obsolete.
According to Abiru, the Acts have all “surpassed the three-decade mark” and, therefore, no longer adequately capture contemporary challenges.
He added that if the Nigerian insurance industry is to compete globally, the reforms in the new bill are necessary to bring it to international standards.
According to the senator, this also forms part of the move to make Nigeria the number one financial hub in Africa and one of the 20 largest economies in the world.
The House of Representatives will further consider it, and President Bola Ahmed Tinubu will give it final assent, making it a law and requiring all insurance companies to comply.
Other reforms in the bill
The bill also increases penalties for individuals operating insurance businesses in Nigeria without proper license to “N25 million, a prison term of two years, or both.” This is a 1000% increase from the N250,000 fine already existing.
Recall that the Senate is also considering other key economic bills at the moment, including the Tax reform bill, which has now been passed for a second reading.
Earlier this year, banks had to undertake a series of corporate actions to raise capital and meet new minimum capital as required by the Central Bank of Nigeria.
Some banks have even had to consider selling stakes in subsidiaries to raise capital.
NAICOM moves against weak insurance companies
In related news, Legit.ng earlier reported that weak insurance firms in the country may soon lose their position in the market, according to the National Insurance Commission.
This came after NAICOM sacked the board and management of Africa Alliance Insurance and appointed an interim board.
The commission said that, given what happened in the African Alliance, an operational line has been drawn for insurance companies in the country.
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Source: Legit.ng
