Senate, on Tuesday, passed a bill seeking to increase the capital base of risk-based insurance companies in the country, just as it reduced the figures earlier proposed in the bill.
This was sequel to the consideration and adoption of the recommendations of the report of Senate Committee on Banking, Insurance & other Financial Institutions on the Nigerian Insurance Industry Reform Bill, 2024 presented by its chairman, Senator Adetokunbo Abiru (APC Lagos East) during plenary.
The relevant laws in the piece of legislation include a bill for an Act to repeal the Insurance Act, CAP. 127 laws of the Federal Republic, 2004; the Marine Insurance Act, 2004; the National Insurance Corporation of Nigeria Act, 2004; the Nigeria Reinsurance Corporation Act, 2004, and enact the Nigeria Insurance Industry Reform Act, 2024, to provide for a comprehensive legal legal and regulatory framework for insurance business in Nigeria and for related matters
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The previous provision of the bill pegged the minimum capital requirement for non-life insurance business at N25 billion, life assurance business at higher than N15 billion and reinsurance, N45 billion.
Presenting the report, Senator Abiru, said “a person shall not carry on insurance business in Nigeria unless the insurer has and maintains, while carrying on that business, a minimum capital, in the case of (i) N15, 000, 000, 000. 00 (N15 billion) or (ii) risk based capital determined by the commission.
“Life assurance business, the higher of (i) N10, 000, 000, 000, 00 (N10 billion), or (ii) risk based capital determined by the commission.
“Reinsurance business, the higher of (i) N35, 000, 000, 000.00 (N35 billion), and (ii) risk-based capital determined by the commission.”
He added that in determining the risk based capital required, “the commission shall take into consideration the capital for insurance risk, market risk and operational risk, and apply such capital changes on assets and liabilities as shall be determined from time to time.”
Senator Abiru explained that “the increase in minimum capital from the current capital of N2 billion to N10 billion (life), N3 billion to N15 billion (non life) and N10 billion to N35 billion (reinsurance) is necessitated by depreciation in the value of the currency, Finance Act 2022 which has redefined the composition of the capital, inflation, international competitiveness, AfCFTA competitiveness, capital flight due to over reliance on foreign insurance, emerging risks such as cyber insurance, insurance, consumer credit insurance, etc.”
The minimum capital is to be deposited with the Central Bank of Nigeria, CBN.
Senator Abiru disclosed that stakeholders, during the public hearing, widely supported the bill, highlighting that existing laws no longer meet the evolving needs of the industry.
“The current insurance legislation is over two decades old and lacks provisions to address contemporary challenges and foster growth and innovation,” he said.
In his contribution, Senator Jimoh Ibrahim (APC Ondo South) however, raised concerns about the proposed minimum capital requirement of N45 billion for reinsurance businesses, suggesting the status quo should be maintained due to the current economic situation.
But the Deputy Senate President, Senator Barau Jibrin noted that the passage of the bill was necessary to align the insurance ecosystem with contemporary economic realities, which would ultimately benefit the country.
He said: “This Act, once it receives concurrence from the House of Representatives and assent from the President, will significantly contribute to shaping our economy for the better.
“Economies are dynamic and constantly changing, so it is incumbent upon the authorities of every nation to update their legislation to align with contemporary realities.
“This is precisely what the passage of this legislation aims to achieve to restructure the entire insurance ecosystem in line with current realities.
“I am confident that the country will benefit greatly when the law is eventually assented to.”