As insurance companies make various efforts to meet up with the recapitalisation programme, the National Insurance Commission has been advised to ensure that no company dies, but should convert to micro-insurance firms those that fail to scale the hurdles.
Making this assertion, the Managing Director/Chief Executive Officer of Achor Actuarial Services Limited, Mr Pius Apere, noted that converting failed insurers to micro-insurance firms would deepen the micro-insurance segment of the market.
At the annual conference of the National Association of Insurance and Pension Correspondents in Lagos, Apere said it would be ideal to covert the failed insurers to micro-insurance firms as they already have the required capital to operate in the sub-sector.
Micro-insurance guidelines stipulate that a unit micro-insurer must have N15m as the capital base for life business, N25m for general business and N40m for composite business.
A state micro-insurer must have N40m for life business, N60m for general business and N100m for composite business, while a national micro-insurer must have N200m for life, N400m for general and N600m for composite.
According to Apere, all existing insurance companies have capital base far above this requirement, as a life company has N2bn as capital base, general has N3bn and composite has N5bn.
Apere said, “Now that the Tier-Based Minimum Solvency Capital policy is cancelled, it will be appropriate to revisit the tiered minimum capital base approach for micro-insurance by encouraging existing conventional insurance companies that will not be able to recapitalise under the new recapitalisation regime to register as national micro-insurers to serve the low-income segments, thereby supporting the evolution of more inclusive insurance systems.
“This would no doubt significantly increase the number of micro-insurance providers needed, which in turn would accelerate the insurance penetration at the grassroots in the country. Such un-recapitalised conventional companies would leverage more on their existing Information Technology infrastructure, quality staff and relatively lower expected strain on resources.”
According to him, the micro-insurance guidelines state that ‘Registered insurance companies shall be granted national micro-insurer licence upon application,’ which is in line with and/or similar to the concept proposed above.
He, however, stated that allowing the recapitalised conventional insurance companies to enter the micro-insurance market would have its implication in terms of unethical business practices and undue price competition (e.g. rate-cutting) at the detriment of other micro-insurers.