The bill provides an increase in the reinsurance of the insurance companies from ₦10 billion to ₦35 billion, while the non-life insurance was increased from ₦3 billion to ₦15 billion.
The Senate on Tuesday passed a bill seeking to increase the minimum capital for insurance companies operating in Nigeria from ₦2 billion to ₦10 billion, a 400 per cent increase.
The bill also provides an increase in the reinsurance of the insurance companies from ₦10 billion to ₦35 billion, while non-life insurance was increased from ₦3 billion to ₦15 billion.
It was sponsored by Adetokunbo Abiru (APC, Lagos East), the chairman of the Senate Committee on Banking, Insurance and other Financial Institutions.
The upper chamber passed the bill after considering the committee's report clause by clause at the Committee of the Whole, chaired by the Deputy Senate President, Barau Jibrin.
It was passed after most lawmakers supported it when Mr Jibrin put it to a voice vote.
Provisions of the bill
The bill seeks to regulate the insurance business in Nigeria by consolidating various existing legislations such as the Insurance Act, 2003; the Marine Insurance Act; Motor Vehicles (Third Party Insurance) Act; the National Insurance Corporation of Nigeria Act; and the Nigeria Reinsurance Corporation Act.
Section 15 of the bill states that;
(1)A person shall not carry on insurance business in Nigeria unless the insurer has and maintains the minimum capital, in the case of
(a)non-life insurance business, the higher of
(i)₦15,000,000,000.00 or
(ii)risk-based capital determined by the commission
(b)life assurance business, the higher of
(i)₦10,000,000,000.00 or
(ii) risk-based capital determined by the Commission.
( c) reinsurance business, the higher of -
(i)₦35,000,000,000.00 and
(ii) risk-based capital determined by the Commission.
Committee's report
While presenting the committee's report, Mr Abiru said the increments were necessary because of the depreciation in the value of Nigerian currency.
The lawmaker also explained that the increase was because of the Finance Act 2022, which redefined the composition of the capital, international competitiveness and AfCFTA.
He also emphasised that the provisions of the current insurance law do not resonate with current realities and cannot address contemporary challenges in the insurance industry.
"They do not resonate with the current dynamics and evolving needs of Nigeria's insurance industry. All these legislations have surpassed the three-decade mark and the lack of issues that can adequately address contemporary challenges and support growth and innovation in this leading industry.
"These legal obsolescence have led to some of the regulatory inefficiencies in the insurance industry, and these have also hampered the industry's ability to successfully compete on a global level," Mr Abiru explained.
He assured that the bill's new provisions would benefit the insurance industry and develop the country's economy.
"Another objective is that it will ensure that the insurance sector contributes positively to the principal objectives of the financial system in order to make Nigeria Africa's financial hub and one of the 20 largest economies in the world," the senator said.
Debate
Ondo South Senator Jimoh Ibrahim expressed concerns that the increment of insurance capital will lead to the extinction of insurance companies in the country.
"We only have one re-insurance company, and now increasing the capital. As a matter of fact, 20 per cent of that will be deposited in CBN forever. This increase will lead to their death," he argued.
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The senator, who owned the Nicon Insurance Ltd and Nigeria Reinsurance Corporation until they were taken over by AMCON in 2021 over an alleged debt, recommended that the current capital requirement of ₦2 billion for insurance companies be retained.
However, Mr Ibrahim's proposal was neither seconded nor supported when the deputy senate president put it to vote. Instead, the lawmakers voted to retain the committee's recommendations.
With the passage, the bill will now be transmitted to the House of Representatives for concurrence. If the lower House concurs with the provisions, it will then be transmitted to the country's president for assent. If not, both chambers will set up a committee to harmonise their positions before transmitting it to the president.
If signed into law by the president, insurance companies operating in Nigeria must comply with expected minimum capital requirements to continue operations.
