Ghana Announces New Minimum Capital Requirements For Insurance Entities
Commissioner of Insurance, NIC, Ghana, Justice Yaw Ofori
Poised to strengthen the capital base of its insurance industry, the Ghanaian National Insurance Commission (NIC) has announced new minimum capital requirements (MCR) for all its insurance regulated entities.
The new minimum capital requirements (MCR) for the various regulated insurance entities that operate in the insurance sector start with effect from June 30, 2021.
This was contained in a circular entitled New Minimum Capital Requirements (MCR) For Insurance Entities with reference NIC/CIR/ 15/HOS/COI, dated June 20,2019, signed by the Commissioner of Insurance, Justice Yaw Ofori (Mr.), addressed to all Chief Executive Officers of Insurance, Reinsurance Companies & Intermediaries and copied President, Ghana Insurers Association and President, Ghana Insurance Brokers Association.
According to the circular, the consultations that led to the eventual announcement of the new minimum capital requirements started in 2017.
In the new recapitalization requirements for different regulated entities, Life and Non-Life insurance companies are required to pay 50 million Ghanaian Cents up from 15 million they were paying previously.
Reinsurance companies will now have to raise their capital from 40 million Ghanaian Cents to 125 million Ghanaian Cents, while reinsurance broking firms will continue to pay one million Ghanaian Cent which they were paying previously.
In the new capital regime, insurance broking companies and Loss Adjusters are required to raise their capital from 300,000 Ghanaian Cents to 500 Ghanaian Cents.
The Commissioner of Insurance said to ensure that the recapitalization exercise achieves its’ intended objectives of improving the financial capacity and liquidity of the Insurance industry, companies will be required to meet the new requirements through fresh capital (cash) injection; or Capitalization of audited profits (retained earnings); or a combination of the above options.
He said Injection of property or revaluation surpluses will not be accepted, stating that any unencumbered property that is introduced will have to be sold for cash and the proceeds capitalized by at least six months before the capitalization date, that is, by December 31, 2020.
He said the new MCR will be immediately applicable to all new applicants and pending applications while existing firms will have until June 30, 2021 to comply with the new MCR.
He said The Commission would accelerate the implementation of its Risk Based Solvency Capital framework to ensure that in addition to the MCR, the capital of a firm is commensurate with the risks it bears.
Under the new timelines for meeting the new MCR, the Commissioner said all firms will be required to submit their recapitalization plan by August 3L,2019. The plan should set out exactly how the MCR will be met with timelines and milestones. This will include actions to be undertaken and the sources of any new capital injection.
“November 15, 2019, NIC will provide feedback on initial recapitalization plan and will commence one on one meeting with each insurance company on its recapitalization plan. After engagement with each firm, the NIC will provide written feedback on initial recapitalization plan.
“December 15,20t9 Regulated entities to Submit final recapitalization plan and initial recapitalization plan to be finalized and submitted to NIC.
“June 30, 2021 all entities to meet new MCR; direct insurers are expected to have Equity of at least GHC 50 million Ghanaian Cent and Capital Adequacy Ratio (CAR) of 750%,” Mr. Ofori said.
In the new dispensation, he said, Reinsurers are expected to have equity of l25 million Ghanaian Cent and Capital Adequacy Ratio (CAR )150% while Insurance brokers and Reinsurance brokers are required to have equity of 500,000 and one million Ghanaian Cents respectively.
The mandate of the Commission, according to him, is to protect the interest of policyholders by ensuring a financially strong insurance industry.
He said The new MCR is one of the initiatives the Commission is taking to achieve this, adding that the Commission strongly urges Shareholders, Directors and Executives to take all proactive steps to meet the new capital requirements by the set date.
While soliciting the cooperation of all stakeholders, Ofori said the Commission will work with all industry players and provide the needed assistance to help the industry meet the new MCR which he said will help Ghanaians enjoy the benefits of a well-developed Insurance market which includes improvement in the well-being and welfare of Ghanaians and the economy as a whole.
