The National Insurance Commission (NAICOM) has issued an exposure draft of its “Insurance Risk-Based Capital Regulation, 2024,” introducing new minimum capital requirements aimed at strengthening the capital adequacy and resilience of Nigeria’s insurance sector.
The draft, detailed in a circular numbered NAICOM/TD/SUP/FA and signed by the Director of Supervision, Oluwatoyin Charles, was circulated to insurance institution CEOs.
Under the proposed framework, insurers must adhere to updated minimum capital thresholds designed to mitigate potential industry risks.
“The minimum capital requirements prescribed for the purposes of the Act is: In the case of a non-life insurer, N10bn; in the case of a life insurer, N8 billion; in the case of a reinsurer, N20 billion.”
This move aligns with NAICOM’s goal to ensure that insurers hold capital reserves proportionate to the risks inherent in their operations, thereby safeguarding policyholders.
The circular highlights the Commission’s commitment to a “Risk-Based Capital” approach, a global standard in regulatory oversight that assesses capital adequacy through a comprehensive balance sheet view.
This method addresses a variety of risks insurance, market, credit, and operational associated with each insurer, ensuring a more tailored and robust capital management policy across the sector.
To promote industry participation in finalising the draft, NAICOM has invited feedback from stakeholders, setting a submission deadline of November 11, 2024.
Insurers are encouraged to offer insights on the regulation’s applicability to help fine-tune its objectives, which are to align insurers’ capital levels with their unique risk profiles.
“We are pleased to forward the draft Insurance Risk Based Capital Regulation 2024 (RBC Regulation) as attached.
“The concept of Risk-Based Capital refers to the principle for assessing Capital Adequacy adopting globally accepted regulatory standards for supervision of the insurance institution in line with Insurance Core Principles (ICP) 17.
“The draft RBC Regulation adopts a total balance sheet approach in establishing the regulatory capital requirements to address some of the relevant and material risks categories (i.e. Insurance, Market, Credit, and Operational Risks) of individual insurer(s).
“To ensure the draft RBC Regulations is effective and practical, we invite your feedback and comments on the draft. Your input will greatly contribute to the finalisation of the Regulation.
“Kindly provide your feedback on or before 11th November 2024 via email,” the Commission emphasised, urging insurers to submit their responses electronically.