The National Insurance Commission, NAICOM, has said that it will not allow insurance companies to recapitalise with illicit funds in their bid to meet the new minimum paid-up capital requirement.
NAICOM officeNAICOMNAICOM also said that fixed assets like buildings will not be accepted as part of the capital structure of an insurance company except the company converts the structure to cash and inject the funds into its capital base.
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Director, Policy and Regulation Directorate of NAICOM, Mr. Pius Agboola, disclosed this at a seminar for journalists in Ogun State, noting that that many companies included buildings as part of their capital base in the last recapitalization exercise in 2007 but could not convert to cash till date.
He said, "The liquidity position of some of the underwriters is very bad. This is because, since the last recapitalization exercise, heavy investments are made on fixed assets like building, land etc, which are impacting on their ability to meet current obligations as they fall due. So NAICOM will not accept such fixed assets as part of their capital structure again in the ongoing exercise. NAICOM will also scrutinise all sources of funds and illicit funds will not be accepted."
According to Agboola, the current capital increase will make the companies liquid to meet their obligations.
He said that NAICOM had put in place measures that would spot funds from unwholesome sources as insurance operators would have to clearly state the sources of their new capital.
He said that in line with the Anti Money Laundering and Combating the Financing of Terrorism (AML/CFT) regulation, the Commission is working assiduously to ensure the industry is not made a haven for illicit funds.
He said, "Every Kobo presented by operators must be accounted for."
It will be recalled that NAICOM in a circular dated May 20, 2019, stated that, "The minimum paid up share capital shall be through any or a combination of the following; existing paid up share capital; cash payment for new shares issued; retained earnings - capitalisation of undistributed profit; payment in kind (other than by way of cash) for new shares issues such as properties; treasury bills; shares; bond which must be converted to cash not later than three months to the deadline for recapitalisation and share premium."
NAICOM added that the items listed above can be achieved through merger and acquisition.