Insurance regulator in Nigeria extends insurers’ recapitalization deadline to December 2020

NIGERIA – The National Insurance Commission has extended the recapitalization deadline for insurance companies earlier slated for June 30, 2020 to December 31, 2020.

The commission disclosed this in a circular to all insurance and reinsurance companies with the headline ‘Minimum paid up share capital policy for insurance and reinsurance companies in Nigeria.’

On deadline for recapitalization, it stated, “The commission has reviewed the recapitalization plans submitted by operators and the various levels of compliance have been observed.

Similarly, it has noted the inputs from the various engagements with relevant stakeholders.

The commission therefore hereby extends the recapitalization deadline to December 31, 2020.”

Recapitalization is a form of corporate reorganization which involves making substantial changes to a company’s capital structure.

 It is one of the strategies companies use to improve their financial stability.

A company may achieve this by adding more debt, more equity, or both to its capital.

On the escrow accounts with the Central Bank of Nigeria, it stated that, “The CBN has obliged the commission with the recapitalization escrow account (T24) for the deposit of fresh funds raised for recapitalization.”

“As part of the measures to ease the recapitalization exercise, some of the relevant agencies have set up help desk to fast- track processing of application for ‘No objection’ and for approvals,” the statement explained in a circular.

It added that engagements with these agencies on other palliatives were ongoing.

In an earlier circular, NAICOM raised life insurance companies’ capital from US$5.53 million (N2bn) to US$22.23 million (N8bn).

General companies got a raise from US$ 8.30 million (N3bn) to US$ 27.66 million (N10bn), while composite insurance companies’ capital was raised from JUS$ 13.83 million (N5bn) to US$49.79 million (N18bn).

The regulator also increased the capital of reinsurance companies from US$ 27.66 million (N10bn) to US$55.33 million (N20bn).

NAICOM stated that the insurance firms’ paid-up capital would be their new capital base.

The decision to recapitalize may be taken by the company voluntarily, but sometimes a company undertakes compulsory recapitalization in compliance with a regulatory directive.

In the latter sense, recapitalization has proven to be a useful tool in the hands of the Nigerian government for sectoral reformation to sustain adequate economic growth and development.

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