The National Insurance Commission (NAICOM) has withdrawn and canceled the circular on Tier Based Minimum Solvency Capital (TBMSC) policy meant to recapitalize and reclassify insurance companies.
The circular has since sent shock-waves within the insurance companies and observers across the continent.
While some operators who have expended millions on compliance procedures on the policy describe it has a shame on the Commission, others who had rejected compliance and proceeded to court to challenge the Commission feel vindicated that the policy was a ploy to take over their companies.
A circular signed by the Director, Policy and Regulation, NAICOM, Pius Agboola, for Commissioner for Insurance, entitled: Withdrawal of Circular on Tier Based Solvency Capital Policy for Insurance Companies in Nigeria and issued to all insurance companies, reads: “Pursuant to the powers conferred by the enabling laws, the Commission hereby withdraws and cancels the Circular dated August 27, 2018 with reference number NAICOM/DAPCIR/14/2018 and titled Tier Based Solvency Capital Policy for Insurance Companies in Nigeria.”
The circular which stated that the withdrawal and cancellation takes immediate effect did not give any reason for the cancellation of the policy.
Observers are of the view that the withdrawal and cancellation may probably be connected to the litigation by shareholders, who were not comfortable with the policy.
An observer who spoke on condition of anonymity describe the action by NAICOM as shameful and sad.
He said the development is strange and only means that the Commission has lost the battle to get the industry on the right part.
He wondered why a policy that was expected to encourage growth through partnership and merger and acquisition would be cancelled for with no reason given by the Commission.
He noted that the banking sector have been able to recapitalize many times without a problem but it has become difficult for insurance sector to do the same successfully.
A CEO of one of the companies said his organization has spent money trying to comply with the policy since its introduction on August 27.
He lamented that this has now become a waste based on NAICOM’s decision.
One of the CEOs who think the policy was consummated in bad fate said the Commission has shown signs that it is confused.
He believes that cancelling the policy is good for them as it would have led to forceful takeover of their companies.
Sequel to this, NAICOM said the sector is characterized by inadequate capital, inability by some companies to pay claims promptly; dearth of appropriate human capital and professional skills; poor returns on capital; too many fringe players; incidences of rate cutting; corporate governance issues;
Other problems of the industry are insurance premium flight; lack of innovation in product development; lack of awareness on the part of consumers on the suitability of insurance products; low GDP per capita figures among others.
