Joseph Inokotong, Abuja
The Federal Government said it has put in place measures to check usage of ill-gotten wealth by insurance companies to recapitalise.
The move, it said was in line with the Anti Money Laundering and Combating the Financing of Terrorism (AML/CFT) regulation, and the Federal Government is working to ensure that insurance industry does not become a haven for illicit funds.
A source at the National Insurance Commission (NAICOM) told Daily Sun at weekend in Abuja that the Commission has put mechanisms in place to prevent and identify funds from questionable sources filtering into the indsutry through the ongoing recapitalisation process of the insurance sector.
One of the deft moves, the source said is the requirement by the insurance operators to clearly disclose the sources of their new capital.
According to the source, NAICOM would periodically issue circulars to direct the insurance operators on what to do, when it is observed that they have deviated from the right path and laid down rules.
The source explained that every single kobo presented by operators must be accounted for, and would be screened to authenticate the source, stating that the recent circular issued by NAICOM had clearly stated how the operators should go about raising the needed capital.
In the circular, obtained by The Sun, NAICOM charged operators to ensure their new capital is neither a loan nor margin facility of any sort.
The circular reads in part: “For the avoidance of doubt, and for an instrument to be treated as paid-up share capital, the following criteria among others must be satisfied: It must represent the most subordinate claim in liquidation of the insurer/ reinsurer; the investor is entitled to a claim, only on the residual assets that is proportional with its share of issued capital, after all senior claims have been paid in liquidation (i.e has an unlimited and variable claim, not fixed or capped claim); the principal is perpetual and never repaid outside of liquidation.
“Distributions are paid out of distributable profit or retained earnings; there are no circumstances under which the distributions are obligatory and it must not be a loan on the Company or margin facility whatsoever.”
Speaking on recapitalisation, the Director, Policy and Regulation Directorate of NAICOM, Pius Agboola, said: “The liquidity position of some underwriters is very bad. This is because, heavy investment are made on fixed assets like building, land etc, which are impacting on their ability to meet current obligations as they fall due. The capital increase will thus make the company liquid to meet their obligations.”
Also NAICOM directed that in furtherance to the circular dated May 20, 2019, the minimum paid up share capital shall be through any or a combination of the following: “existing paid up share capital; cash payment for new shares issued; retained earnings – capitalisation of undistributed profit; payment in kind (other than by way of cash) for new shares issues such as properties; treasury bills; shares; bond which must be converted to cash not later than three months to the deadline for recapitalisation and share premium.”
NAICOM stated clearly that the items listed above can be achieved through merger and acquisition.
It added that cash payment for new shares issued shall be deposited in the escrow account with the Central Bank of Nigeria (CBN), stressing that deposited funds shall be released not later than 30 days after confirmation and issuance of a new licence.
The Commission stated that the shareholders’ fund as at the last date of recapitalisation for existing insurance/reinsurance companies shall not be less than the required minimum paid-up share capital.