Analyst questions rationale behind insurance companies’ recapitalisation

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Insurance analyst Edgar Wiredu has questioned the rationale behind attempts by the National Insurance Commission to increase the minimum capital for insurance companies.

The National Insurance Commission (NIC) has said plans are far advanced for the implementation of the new minimum capital requirement for insurance companies.

The move, according to the NIC, is aimed at growing the industry to create numerous opportunities in the country, especially in the oil and gas sector.

A similar exercise in the banking sector will most likely see the consolidation of some banks in the country to meet the ¢400 million minimum capital requirement by end of year.

But there has been a subtle protest within the insurance industry with many questioning the reason behind the move.

Deputy Commissioner Kofi Andoh confirmed on TV3’s BUSINESS FOCUS show that although the intention is clear, discussions are still underway to come out with a figure which will be agreed by all stakeholders.

Reacting to Mr. Andoh’s disclosure on the same platform, Mr Wiredu disagreed with the regulator’s view of trying to compel companies to raise additional capital in order to be strong.

He also questioned the current state of the risk-based policy, which ensures that insurance companies keep adequate capital and make technical provisions to meet their liabilities, and improve their service delivery.

“Minimum capital comes up as a result of an increase in a company’s size, operations and nature of business. That is the rationale for an increase in minimum capital. It is not because we want big players. It is not a blanket or a wholesale thing.

“That blanket thing is what used to be called the fixed capital standards and this is something that was happening some 40 or 50 years back,” he argued.


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