On July 23, 2019, the National Insurance Commission (“NAICOM”) issued two circulars numbered NAICOM/DPR/CIR/25-01/2019 and NAICOM/DPR/CIR/25-02/2019 (the “Circulars”), in furtherance of its circular of May 20, 2019 which introduced a new minimum paid up share capital policy for insurance and reinsurance companies in Nigeria. The Circulars provided directives to insurance and reinsurance companies on the various ways the minimum paid up share capital requirements may be achieved, and the procedure for the submission of the proposed recapitalisation plans by all insurance and reinsurance companies to NAICOM.
Highlights of NAICOM/DPR/CIR/25-01/2019
- The recapitalization of the insurance and reinsurance companies’ can be attained through (i) existing paid up share capital, (ii) cash payment for the new shares issued, (iii) retained earnings, (iv) payment in kind for new shares issued which must be converted to cash not later than three (3) months to the deadline for recapitalisation, and (v) share premiums, or by a combination of the above listed methods.
- Cash payments for new shares issued shall be deposited in an escrow account with the CBN. Deposited funds shall be released not later than 30 days after the confirmation and issuance of a new insurance operator license.
- The shareholders’ fund as at the last date of recapitalisation for existing insurance and reinsurance companies must not be less than the required minimum paid-up share capital.
- The Statutory Deposit, as defined in the Insurance Act 2003 (the “Act”), is to be paid in accordance with the Act, and must be made no more than 30 days to the deadline for the recapitalisation.
- All mergers and acquisitions are to be concluded not later than 60 days before the recapitalisation deadline.