NAICOM fights dirty money in insurance capitalisation

National Insurance Commission (NAICOM) has put measures in place to prevent funds from unwholesome sources from being invested in the industry during this period of recapitalisation of insurance companies.

One of the measures is that operators would have to clearly state the sources of new capital injections.

NAICOM sources told our correspondent other measures being put in place include continuous issuance of circulars to guide the operators whenever it is observed that they are moving away from the required rules.

The guidelines will be drafted in conformity with the Anti Money Laundering and Combating the Financing of Terrorism (AML/CFT) regulation, the commission is working assiduously to ensure the industry is not made a haven for illicit funds.

A recent circular issued by the commission clearly stated how the operators should go about in raising the required capital.

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“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 subordinated 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 principle 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”, the circular noted.

Further, it noted 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 added that the items listed above can be achieved through merger and acquisition.

Consequently, cash payment for new shares issued shall be deposited in the escrow account with the Central Bank of Nigeria (CBN), adding that deposited funds shall be released not later than 30 days after confirmation and issuance of a new licence.