The National Insurance Commission (NIC) has extended the timeline initially given to insurance companies after the recapitalization exercise by six months, to enable industry players to adequately prepare to meet the new minimum capital requirement.
The reason for the extension of the deadline from June 2021 to January 2022 is attributed to the disruptions caused by the Coronavirus pandemic, slowing down economic activities and affecting individual livelihoods and businesses.
Although some industry players have lauded this extension proposing that the recapitalization exercise will put a strain on existing firms, others hold contrary views that delaying the original timeframe set for recapitalization could result in an erosion of gains made by the insurance industry in terms of premium receipts.
Insurance firms which will still be unable to meet the new capital requirement have been advised to consider partnering others as they stand to benefit from such partnerships. Mergers present the opportunity to not only raise required capital but also pool together some of the best human resources which creates synergies and a situation that would serve to drive innovation and move the industry further.
The recapitalization of the insurance industry is expected to boost its capacity, improving insurance penetration rate which lingers around 1 percent.
New Minimum Capital Requirement
In June 2019, NIC, the regulatory body in charge of the Insurance industry in Ghana announced a new minimum capital requirement for the different arms within the industry.
The minimum operating capital was revised upward in the insurance sectors “to situate the industry for ‘deep-pockets’ to support ‘big-ticket’ transactions in line with macroeconomic development” and to mainly ensure that insurance companies have “enough capacity to absorb and retain risks in the country” as part of ongoing efforts to stabilise, strengthen and enhance the financial services sector’s capacity to support socio-economic development.
Effectively, the recapitalization exercise demands that the minimum capital requirement for Life and Non-Life entities will increase from GH¢15 million to GH¢50 million; reinsurance companies from GH¢40 million to GH¢125million; and for insurance broking companies from GH¢300,000 to GH¢500,000; while that of reinsurance broking companies was maintained at the current GH¢1 million.
Serene Insurance Company Limited meets Capital Requirement
Mr. Eric Seddy Kutortse, Executive Chairman of the First Sky Group, the parent company of Serene Insurance Company Limited has announced that it has fully met the New Minimum Capital Requirement of the NIC despite the new deadline.
Speaking in an interview, Chief Executive Officer of Serene Insurance, Mr. Christopher Boadi-Mensah opined that this development means Serene Insurance becomes one of the first, if not the first Insurance Company to be fully capitalized.
Mr. Christopher Boadi-Mensah further asserted that recapitalization comes with several benefits, including financial strength and capacity to underwrite bigger accounts as well as capacity to retain large portions of insurance business. Other benefits include ability to pay legitimate claims, boosting the confidence of the insuring public and sound reserves for investment.
With additional six months to the deadline, Serene Insurance is well-placed to continue with its drive towards redefining public perception about insurance in Ghana, offering the best value to the insuring public and helping to increase insurance penetration in Ghana, he remarked.
