…says assets, others must be converted to cash
With four months left to the end of the first phase of recapitalisation, the National Insurance Commision (NAICOM) has further tightened its noose on insurance companies with regard to meeting the minimum paid-up share capital in cash.
The first phase of the recapitalistion exercise is expected to end December 31, 2020 while the whole process ends September 2021.
In a circular issued yesterday, which is furtherance to earlier ones referenced /25/2019, dated May 20, 2019, July 23, 2019 and December 30, 2019 respectively on the subject matter, the commission noted that the minimum paid-up share capital shall be through any or a combination of either and existing paid-up share capital, cash payment for new shares, retained earnings – capitalisation of undistributed profits.
Specifically, the circular, signed by the Director, Policy and Regulation, NAICOM, Mr Pius Agboola, for the Commissioner of Insurance, Mr. Sunday Thomas, listed payments in kind, such as properties, T-Bills, Shares, Bonds, share premium among others for new shares issued, which must, however, be converted to cash not later than three months to the recapitalisation deadline.
According to the commission, the above components are to be converted to paid-up share capital in compliance with the recapitalisation exercise and applicable laws and regulations in Nigeria.
“For private placement, appropriate clarification have been obtained from the relevant regulatory
agency to the effect that insurance and reinsurance companies may offer more than 30 per cent of the existing issued and fully paid shares.
“Submission of recapitalisation progress report shall now be monthly and the report shall be submitted not later than five working days after the end of each month, effective end of August, ” the circular noted.
It noted that the timeline and activities for the first phase of the recapitalisation had been scheduled to commence on August 30 for submission of monthly recapitalisation progress report, adding that completion of the submitted reports would be after five working days after the end of each month.
The commission noted that all mergers for the purpose of meeting the first phase of November 30, 2020 recapitalisation would commence on September 14 and shall be irreversible, except with a written approval of the commission.
According to the circular, NAICOM shall commence capital verification on September 21, while communication of capital verification report to respective companies shall begin on November 30 and end January 21,2021
”Deadline for compliance with the first phase of the new minimum paid-up capital by all existing companies remains December 31 and issuance of letters of compliance as at date is February 26, 2021,” the commission said.
Newsfieldglobal recalled that the commission had in June this year altered the recapitalisation time table as it factored in the impact of coronavirus pandemic on the exercise originally slated to end this year.
In a circular issued to that effect, the commission split the exercise into phases with the underwriters expected to meet 50 per cent payment by December 31, 2020.
According to the circular, insurance providers must meet 50 per cent of the new minimum capital requirements while reinsurance providers are required to meet up to 60 per cent of the new minimum capital requirement.
The second phase, which will end on the final deadline of September 30, 2021, would require 100 per cent compliance with the minimum capital requirement from all insurance and reinsurance providers.
Justifying the alteration in deadline, which was the second in the series, the commission said: “In our view, we think the decision to extend the deadline is reasonable under current circumstances. The coronavirus pandemic has ravaged global economic and financial systems thus making it more difficult for an already unattractive insurance sector to raise much-needed capital.”
According to the new paid-up share capital, life insurance providers are expected to have a minimum capital of N4 billion (existing minimum – N2bn) by December 31, 2020 and paid up capital of N8bn by September 30, 2021.
General insurers are required to meet a minimum paid-up capital of N5 billion (existing minimum – N3bn) and N10 billion by 31 December 31, 2020 and September 30, 2021 respectively.
Composite insurers are expected to have a minimum of N9 billion in paid up capital (existing minimum – N5bn) by December 31, 2020 and N18 billion by September 30, 2021 while reinsurers should have N12 billion (existing minimum – N10bn) in minimum paid up capital by December 31, 2020 and N20 billion by September 30, 2021.