Edgar Wiredu, an Insurance Marketer and Expert, has berated the National Insurance Commission (NIC) over its decision to collapse the insurance firms that failed to meet the new minimum capital requirement. He thus, described the move as “useless, unnecessary and retrogressive”.
Speaking on NIC’s directive to the insurance companies, Edgar Wiredu questioned the legality of the regulator’s decision, describing the directive as completely unnecessary and will lead to avoidable job losses. He accused the authorities of altering the laws from their offices.
“What the law requires of the regulator to do is not what the regulator has done. What it has done is an arbitrary decision and it was based on the fact that Bank of Ghana (BoG) raised the minimum capital requirement. Raising the minimum capital is based on a certain formula and you haven’t done that but you are changing the laws from your offices.”Edgar Wiredu
The Insurance Marketer suggested that the payment of minimum capital is pointless because the insurance companies will not use it for anything.
“Minimum capital is supposed to be liquid money. That money cannot be used for anything. It can only be touched with the approval of the regulator when there is an emergency. Brokers don’t underwrite any insurance, so why should they provide minimum capital? …this decision by the NIC is totally useless and unnecessary. We have to be progressive and not come out with directives that are retrogressive.”Edgar Wiredu
The NIC is on the verge of withdrawing the licences of some insurance companies after they were unable to recapitalise to GH¢50 million by the end of the recapitalisation deadline.
By not meeting the new capital requirement, the insurance sector regulator said 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 6th February, 2022, to cough up the funds or close shop and hand over their operations.
In 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
NIC also 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.
The warning that was communicated to the affected companies now risk triggering the collapse of companies, mass layoffs, loss of investments and disruptions in a financial sector that is recovering from the recent clean-up exercise.
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.