The National Insurance Commission (NIC), has reacted to assertions of it being “reluctant” to crack the whip on insurance firms that have failed to meet its GHS 50m minimum recapitalisation directive.
The deadline of the Commission’s directive for insurance firms to recapitalise to a minimum capital of GHS 50m expired on December 31, 2021 – after the extension from the previous deadline of June 30, 2021 – following the announcement of the directive in 2019.
Per the minimum capital requirement directive by the NIC, life and non-life insurance companies are to recapitalise from a minimum of GHS 15m to GHS 50m. For Reinsurance companies, a minimum capital of GHS 125m from the previous minimum capital of GHS 40m.
Insurance Brokerage companies are also to meet a new capital of GHS 500,000 from the previous minimum capital of GHS 300,000.
However, Reinsurance Broking companies’ minimum capital requirement will see no increment and will remain at GHS 1 million.
Some eight months into the year 2022 and after the December 2021 deadline, the observation made is that, the Commission seems to have gone “quiet” on its recapitalisation drive.
But speaking at workshop held for journalists over the weekend in the Central Region, Commissioner of Insurance, Dr Justice Ofori, debunked assertions of the NIC seemingly to drag its feet in punishing and cracking the whip on insurance firms that have failed to meet the minimum capital requirement deadline by revoking their licenses.
According to the Commissioner of Insurance, the “silent” push by the NIC for insurance firms to recapitalise to the required minimum capital is so as to not cause a “disturbance” in the insurance industry.
Dr Ofori noted that, the Commission is undertaking the recapitalisation exercise in a manner that will not create problems for policy holders, employees of the various insurance companies through job losses and the insurance industry at large.
“The recapitalisation exercise is still ongoing, because so much is not being heard about it, it doesn’t mean it is not going on and that it has stopped.
“You know, in such situations you need to know how to peacefully touch the market so you don’t create problems policy holders, staff of insurance firms and the insurance market as a whole.
“For the insurance companies, some have been absorbed, others have merged and few are still looking to meet the target. The recapitalisation exercise is important and as a Commission we will continue to pursue it because, it will help us get the bad ones out of industry (sic),” he remarked at the workshop themed, Understanding the Business of Insurance and its Importance to the Society.
The “silent” recapitalisation approach taken by the NIC stands in sharp contrast to that taken by the Bank of Ghana in the revocation of the licenses of nine banks, 347 microfinance companies and savings and loans institutions, and 23 finance houses that led to the lock-up of millions of cedis in depositors funds and the loss of thousands of jobs.
The new minimum capital requirement according to the NIC is to strengthen the balance sheets of regulated insurance entities, thereby enhancing their underwriting capacity and make resources available for investment in essential technology.
The move is also to improve the development and distribution of appropriate products to increase insurance penetration while strengthening the regulatory framework, implementation of risk based supervision and solvency requirements, strengthening risk management and corporate governance structures and practices including claims payment culture within the industry.
Currently, there are about 142 regulated insurance entities comprising 24 life insurance companies, 29 non-life insurance companies, three reinsurance companies and 85 insurance brokers and loss adjusters with more than GHS 6 billion in total assets as at 2018.