A Federal High Court in Lagos thursday ordered the National Insurance Commission (NAICOM) to stop the implementation of its proposed minimum solvency capital policy scheduled to take effect from September 14, pending the expiration of a 30-day pre-action notice.
Justice Muslim Hassan, gave the order in a class action brought by some shareholders of insurance companies in Nigeria, challenging the new minimum solvency capital policy proposed by the NAICOM.
THISDAY reported recently that the decision by NAICOM to revise backward the recapitalisation deadline from the January 1, 2019, it had earlier fixed, to October 1, 2018, was causing ripples in the industry.
THISDAY had also disclosed that some operators were threatening legal action against the commission.
At the forefront of the move to take legal action against NAICOM were chief executives of insurance firms that fall within the tier two and tier three categories, THISDAY had learnt.
They had described the backward revision of the deadline by NAICOM as a deliberate attempt to disrupt the plans and programmes they had put in place to meet the initial deadline of January 1, 2019.
But at the hearing yesterday, counsel to the applicant, Bert Chucks Igwilo, told the court that they had filed and served the commission a pre-action notice on September 6.
He further said the applicants had before the court, an originating summons ex-parte, restraining the NAICOM from enforcing the proposed policy pending the expiration of the pre-action notice.
Igwilo stated that the originating summons ex-parte was supported by an affidavit sworn by an applicant who was a shareholder in Aiico Insurance Plc and Cornerstone Insurance Plc.
He added that attached to the ex-parte application was the originating summons, the applicants intended to file at the expiration of the pre-action notice.
“My Lord, I humbly apply that the defendant be stopped from implementing the policy pending when we file and serve our processes else it would be too late,” he said.
Justice Hassan gave the order and adjourned further hearing to October 8.
The NAICOM had on August 27, passed a circular with no. NAICOM/DAPCIR/14/2018, dividing the categories of business for insurance companies provided for by the insurance act into tiers.
They had prescribed a tier-based minimum solvency capital for insurers on the basis of their respective risks profiles and their risks management systems.
The applicants who filed the action were Mr Sunday Nwosu, Mr Adeniyi Adebisi, Mr Moses Oke, C.A.C Okpara, Mrs Ayodele Kudaisi, Mr Kenneth Nwosu, Mr Issac Obarinde and Mr Okechukwu Nwaguru.
They had alleged that the proposed policy, passed in the circular, would affect the business and corporate existence of insurance companies and force them to sell their shares below their market price.
In addition, they claimed that the policy was aimed at forcing licenced insurance businesses to increase their paid up share capitals by 100 per cent or face losing their investments.
They also alleged that the proposed policy in the circular was inconsistent with the provisions of Section 25 of the National Investment Promotion Commission Act, 2003.