The National Insurance Commission (NIC) is on the verge of revoking the licences of some insurance companies that failed to meet the recapitalisation deadline set by the commission.
As a result, many Ghanaians who work in the affected insurance companies are set to lose their jobs.
By not meeting the new GH¢50 million capital requirement set by NIC, the insurance sector regulator noted that the companies have also failed to move their capital adequacy ratio (MCR) to 150%, as required by an earlier directive.
NIC has therefore, given the affected companies up to February 6, 2022, to cough up the funds or close their shops and hand over their operations.
The new directive, as communicated to the affected insurance companies, suggested that such companies are now on verge of collapse, mass layoffs, loss of investments and disruptions in a financial sector that is recovering from the recent clean-up exercise.
As an avenue for patient capital, the insurance sector employs thousands of people as permanent employees or contract staff or agents who sell insurance products.
Uncompromising Position of NIC and What the Law Says
According to Experts, the order to cease operation, which was signed by the Commissioner of Insurance, Dr Justice Ofori, and the uncompromising position of the NIC in the midst of the devastating effects of the COVID-19 pandemic on businesses, could cause panic among the insuring public, send hundreds back home, and worsen the hardship situation in the country.
Given the notice issued to the affected companies, the industry regulator indicated that the companies that were unable to raise the capital have breached Section 59 of the Insurance Act 2021 (Act 1061).
“Pursuant to Section 178 of the Insurance Act, the Commission, by this letter, issues a one-month notice of enforcement to [name withheld] effective January 12, 2022. For the purposes of protecting your policymakers, the entire insurance industry and the general public. You will be placed under enforcement with effect from February 10, 2022.”NIC Notice
Affected Companies to Stop Selling Their Products
The notice further warned affected companies not to enter into new contracts with any class of business, renew any existing contracts, vary contracts or engage in any marketing activities. It also ordered the firms to stop their staff and agents from selling their products.
However, the notice added that payments must only be for claims, salaries, statutory requirements and other essential management expenses, but with prior approval from the NIC. “You are, however, required to service existing policies until expiry.”
It also warned the boards and management of the companies that they would be held liable for liabilities resulting from new contracts entered into.
The directive to insurance companies to recapitalise from GH¢15 million to GH¢50 million was issued in 2019 and meant to elapse in June 2021. It was, however, shifted to the end of January 2022 as a result of the impact of the COVID-19 pandemic on businesses.
The new directive will raise the stakes on the impact of joblessness and disruptions to the insurance sector and the financial sector in the country.