COVID-19: NAICOM Announces Business Continuity Measures for Insurance Operators


Ebere Nwoji

The National Insurance Commission (NAICOM) has rolled out palliative measures to sustain insurance operations and shield policy holders from the negative effects of COVID-19 pandemic.

NAICOM said the move was part of its business continuity measures, adding that it was to, “as much as possible, ensure availability of insurance services and protections of insurance policy holders during the COVID-19 Movement Restriction.”

Contained in a circular to all insurance companies that was signed by NAICOM Director Policy and Regulation, Pius Agboola, on behalf of the Acting Commissioner for Insurance, Sunday Thomas, the regulator urged all to, “be diligent, circumspect and supportive of government in its efforts to tame the COVID-19 pandemic.”

According to NAICOM in the circular referenced NAICOM/DPR/CIR/29/2020 and dated 01 April 2020, “Where Approval-In-Principle for the preceding insurance period had been granted, all renewals or extensions of the foreign reinsurance proportions that become due during COVID-19 movement restriction are permitted for renewal on existing basis.

“Where approval-in-principle for the foreign proportion of a new insurance placement is required during the COVID-19 movement restriction, it shall be treated on the basis of “Use and File” subject to prior exhaustion of in-country capacity.”

It added: “For the avoidance of doubt, after utilising available local capacity, the lead insurer is permitted to reinsure the excess of the risk offshore and submit relevant documentations to the Commission thereafter.

“All Post Placement Reports, Reinsurance Treaties and other related special risk foreign reinsurance documentations due for submission during the pendency of the COVID-19 restrictions are to be submitted when movement restrictions are lifted.”

NAICOM further stressed that, “all insurance/reinsurance placements shall be done in accordance with other relevant extant insurance laws, regulations and guidelines while all submissions to the Commission including hard-copies sequel to the above forbearance shall be done not later seven days from the end of COVID-19 Movement Restrictions.”

Indications emerged recently that NAICOM may extend the deadline for the recapitalisation of insurance and reinsurance companies for the second time, due to concerns about the negative impact of COVID-19 pandemic on the exercise. In May 2019, NAICOM had re-introduced the previously suspended
recapitalisation exercise albeit with more stringent capital requirements. Under the revised capitalisation requirements, life insurance insurance firms are required to have a minimum paid up capital of N8 billion, from N2 billion previously, while general insurance companies are required to raise their minimum paid up capital to N10 billion, from N3 billion previously. The regulatory capital for composite issurance was also raised to N18 billion, from N5 billion previously while reinsurance businesses are now required to have a minimum capital of N20 billion, from N10 billion previously.

Analysts at CSL Stockbrokers Limited, noted that though the recapitalisation exercise was long overdue considering the substantial increase in the value of insured assets as well as the adverse impact of fragile macro conditions since the last recapitalisation exercise in February 2007, “the decision to extend the deadline may be imperative in light of the weak investor sentiment, brought about by the dual shock of COVID-19 and the downturn in oil prices.”

“Accordingly, we think the issuance of debts instruments may come at a very high cost to the players at this time considering the risk premium that will be demanded by investors. On the other hand, raising equity capital does not appear feasible. Some of the under- capitalised players currently have negative book value of equity and are trading below their par values. Weak macro conditions would further deter investors as they remain skeptical on the ability of the players to unlock the potentials in the industry. Nonetheless, we expect to see a flurry of mergers and acquisitions in the industry once conditions become more favourable,” they added.