The Senate has proposed a significant increase in the capital requirements for insurance and reinsurance firms in Nigeria.

The lawmakers on Tuesday, December 17, recommended raising the paid-up share capital for reinsurance companies to N35 billion, up from the previous N10 billion.

The Senate also proposed increasing the minimum capital for life assurance businesses from N2 billion to N10 billion and non-life insurance firms from N3 billion to N15 billion.

These new capital base requirements were part of the 2024 Nigerian Insurance Industry Reform Bill, which was passed by the Senate during plenary on Tuesday.

Senator Adetokunbo Abiru, Chairman of the Senate Committee on Banking, Insurance, and Other Financial Institutions, presented the report titled “The Nigerian Insurance Reform Bill 2024.”

Explaining the rationale behind the proposed increases, Abiru noted that the adjustments were necessary due to factors such as currency depreciation, the Finance Act of 2022, inflation, international competitiveness, the African Continental Free Trade Agreement (AfCFTA), capital flight from over-reliance on foreign insurance, and emerging risks like cyber insurance and consumer credit insurance.

Abiru also mentioned that the bill had previously been read the second time on July 18.

He said the bill sought to essentially consolidate various existing legislations regulating the conduct of insurance businesses in Nigeria.

He listed the legislation to include the Insurance Act 2003, the Marine Insurance Act, Motor Vehicles Third Party Insurance Act, the National Insurance Corporation Act, and the Nigerian Reinsurance Corporation Act.

According to him, another major objective of the bill was to enable Nigeria to have a better future for itself and the need for a robust legal and regulatory framework that would see the insurance sector contributing positively to the principal objective of financial assistance practices.

He said to make Nigeria, Africa’s financial hub and one of the 20 largest economies in the world, there was a need to evolve effective risk-based supervision in the regulatory system.

He said the existing rule-based supervision, enabled by the current laws in the insurance sector had become obsolete.

Abiru said that during the public hearing, stakeholders made far-reaching presentations in support of the passage of the bill, adding that the general consensus among them was that laws regulating the industry were obsolete.

He said there was a need to upscale the industry’s potential to compete globally, adding that the current insurance legislations do not resonate with the current dynamics and evolving needs of the Nigerian insurance industry.

Abiru said: “All these legislations have surpassed a two-decade mark and they lack provisions that can adequately address contemporary challenges and support growth and innovation within the industry,” Abiru said.

According to him, legal obsolescence has led to some of the regulatory inefficiencies in the insurance industry.

“These have also hampered the industry’s ability to successfully compete on a global level,” he said.

He urged the Senate to pass the bill, noting that its passage would help provide a comprehensive legal framework for the regulation and supervision of all manner of insurance initiatives in Nigeria.

He said the passage would help the industry to compete globally.

In his contribution, Senator Jimoh Ibrahim (APC – Ondo South) noted that the provision of the Bill on minimum capital requirements for reinsurance business to the tune of N45 billion proposed in the Bill was not in order, given the current economic situation.

He urged the Senate to consider maintaining the status quo of N10 billion minimum capital requirements for reinsurance businesses in the interest of the industry.

“We only have one re-insurance company, and now increasing the capital, this is impossible, and as a matter of fact, 20% of that will be deposited in CBN forever. This increase will lead to their death,” he argued.

Ibrahim’s motion that the status quo for reinsurance business be retained was however not endorsed by the Senate during the clause-by clause consideration as no lawmaker seconded it.

Deputy President of the Senate, Senator Barau Jibrin (APC-Kano North), who presided over plenary after the third reading and passage of the bill, commended the committee for a job.

Barau said: “I commend the Chairman of the Committee on Banking, Insurance and Other Financial Institutions, Senator Adetokunbo Abiru, and the members of the Committee for a job well done. When we have the concurrence by the House of Representatives and the assent of Mr. President, the law will help shape our economy for the better.

“Economies change at all times. It is, therefore, incumbent on the authorities of every nation to recraft their legislation to go in tandem with contemporary realities. And this is what has been done by the passage of this legislation.

“The intent is to restructure the insurance ecosystem to accommodate contemporary happenings within our economy.

“I commend the Chairman of the Committee and, indeed, membership of the committee. They are people of outstanding pedigree who are educated and knowledgeable about the insurance industry.

“So they put in their best, and I am sure the country will benefit from it when the law is eventually passed.” (The Nation)