Insurance coverage business operators say they’re able to conclude the continued recapitalisation train within the business with clearer definition now of what constitutes capital requirement for insurance coverage operations.
That is following a provision in Finance Act 2021 that defines what constitutes capital requirement for insurance coverage operations, as towards what operators described as an obnoxious provision within the 2003 Insurance coverage Act.
Session 33 of Finance Act 2021, which amended part 9 (102) of the Insurance coverage Act 2003, substituted ‘paid-up share capital’ with ‘capital requirement’.
In keeping with the Finance Act, what represent capital necessities for current corporations are: the surplus of admissible belongings over liabilities, much less the quantity of personal shares held by the corporate; subordinate liabilities topic to approval by the fee; and some other monetary instrument as prescribed by the fee.
Admissible belongings, based on the Act, are outlined as share capital, share premium, retained earnings, contingency reserves, and some other admissible belongings topic to the approval of the fee.
Whereas within the case of a brand new firm, capital necessities embody authorities bonds and treasury payments, money and financial institution steadiness, in addition to money and money equivalents.
Ganiyu Musa, rapid previous chairman of the Nigerian Insurers Affiliation (NIA), mentioned insurance coverage underwriters in Nigeria weren’t against recapitalisation, however couldn’t reconcile what constituted the capital as required by the regulator at the moment.
“There isn’t a place on the earth the place solely paid-up share capital is recognised as a component of capital. For us within the business, we weren’t towards recapitalisation, however we had been towards what constituted the capital in step with international customary,” he mentioned.
Musa, who disclosed this whereas giving account of his stewardship because the outgoing chairman of the NIA, mentioned: “We’re delighted to report that with the President’s assent to the Finance Act 2021, we now have a extra acceptable definition of capital. Previous to this time, the definition of capital in Insurance coverage Act 2003 was faulty and extremely restrictive.”
He appreciated the minister of finance, funds and nationwide planning, commissioner for insurance coverage, KPMG and members of the commerce physique for his or her assist in seeing this course of via. “We’re optimistic that this main milestone achievement has eliminated the main encumbrance on the recapitalisation train.”