The recent directive by the National Insurance Commission (NAICOM) to insurance firms to raise their minimum capital requirement by threefold may open up new markets for the insurers in the long run.
The NAICOM directive to the operators on recapitalization announced, last month, which will take effect from January 1, 2019 also included an introduction of a Tier-Based Minimum Solvency Requirement (TBMSR) for the insurance industry, which financial experts say may finally enable local underwriters into such markets as maritime and aviation which had remained almost an exclusive preserve of their foreign competitors.
Local underwriters have lacked the capacity to venture into markets till date on the strength of their lack or low capacity to insure risks in those markets.
Explaining further on the newly-announced levels of capital requirement for operators, MrRasaaq Salami, spokesman for NAICOM, said the insurers who want ‘limited deals or don’t want to take all the risks in their class of business do not need to raise capital.’
Under the new 3 -tier based capitalization, life insurers wanting to take on annuity and group life are required to boost their capital to N6 billion from N2 billion, while non-life operators underwriting all risks including aviation and engineering should shore up their capital to N9 billion from N3 billion, Salami said.
According to NAICOM, last year they ensured companies are not signing up more business than they can handle, so that the industry reduces its risk exposure and boosts liquidity and profitability.
Similarly, companies that want to do both life and non-life business, including oil and gas deals, should increase capital to N15 billion from N5 billion, Salami said.
It would be recalled that Chairman/Chief Executive Officer of Air Peace, Mr. Allen Onyema had berated Nigerian insurance companies for taking advantage of airlines even when, according to him, ‘they cannot insure a single Boeing 737 aircraft.’
Onyema said this at the 2017 Nigerian Bar Association-Section on Business Law, Aviation Committee Conference tagged: “Unlocking the Potential of Aviation Law and Practice in Nigeria” held in Lagos recently.
The Air Peace boss, who was one of the discussants of the topic of the second session of the conference, “The Scope of Legal Practice in Nigeria’s Aviation Sector: Creating Opportunities for Lawyers”, hinted that aside having lawyers with little capacity for handling aviation briefs, the insurance industry is also challenged by low underwriting capacity.“Except lawyers begin to get their acts right, the aviation industry will continue […]