The Federal High Court in Lagos has told the National Insurance Commission (NAICOM) to halt the increment in the statutory minimum solvency capital policy for insurance companies.
Justice Chukwujeku Aneke held that NAICOM cannot increase the statutory minimum solvency capital policy for insurance companies without the National Assembly amending the Insurance Act and Regulation 2003.
He held that the directives/guidelines/circular on capital base increase offends Section 4 of the 1999 Constitution and Section 9 of the Insurance Act and Regulation 2003.
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The court made the orders in a suit marked FHC/L/CS/1518/18 between a lawyer, Tope Alabi, as the plaintiff and NAICOM and the Attorney-General of the Federation (AGF) as 1st and 2nd defendant.
The suit followed NAICOM’s announcement in 2018 that it planned to release the Guidelines for the implementation of the minimum solvency capital policy in August 2018 while implementation was meant to take effect from January 1, 2019.
NAICOM had on August 27, 2018 released a Circular with No. NAICOM/DAPCIR/14/2018, wherein it divided the categories of business for insurance companies as provided for in the Act into tier-based respectively.
The plaintiff averred that it prescribed tier-based minimum solvency capital for insurance firms on the basis of their respective risk profiles and their risks management systems.
The circular increased the capital base of Life Insurance Business to N6 billion; Businesses to N3 billion; and oil and gas Insurance Business to N9 Billion respectively.
The plaintiff in his originating summons urged the court to determine whether NAICOM can unilaterally increase the statutory minimum solvency capital policy for insurance firms, “as contained in Section 9 of the Insurance Act and Regulation 2003, by a mere circular without an amendment to the enabling Statute by the National Assembly to increase such capital base.”
He also prayed the court to determine: “Whether the increase in the statutory minimum solvency capital policy for all insurance companies and the short or inadequate time within which to comply was not steps taken by the 1st Defendant in bad faith,” among others.
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Granting the plaintiff’s prayers, Justice Aneke held that: “After reading Section 7 of the National Insurance Commission Act, I am of the view that the 1st Defendant (the National Insurance Commission), acting under the National Insurance Commission Act, has no powers to increase the paid up share capital of the various categories of insurance companies stated in Section 9(1) of the Insurance Act because such increase will be inconsistent with Section 9 of the Insurance Act.
“I am fortified in this view by Section 61 of the National Insurance Commission Act. I am also of the view that the 1st Defendant has no vires to divide insurance companies into tier levels.
“I also hold that the Plaintiff has the locus standi to institute this suit.
“Finally, I grant reliefs A and D claimed by the Plaintiff. All other reliefs are hereby dismissed. I make no order as to costs.”
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