An Insurance Marketer has described as “useless, unnecessary and retrogressive” attempts by the National Insurance Commission (NIC) to collapse some insurance firms over their failure to meet the GH¢50 million recapitalisation directive.
The NIC is on the verge of withdrawing the licences of some insurance companies after they were unable to recapitalise to GH¢50 million by the end of its recapitalisation deadline.
By not meeting the new capital requirement, the insurance sector regulator said the companies had also failed to move their capital adequacy ratio (MCR) to 150%, as required by an earlier directive.
It has, therefore, given the affected companies up to 6 February 2022 to cough up the funds or close shop and hand over their operations.
The warning that was communicated to the affected companies on 6 January 2022 now risks triggering the collapse of companies, mass layoffs, loss of investments and disruptions in a financial sector that is recovering from the recent clean-up exercise.
But speaking on the Morning Starr on Thursday, Edgar Wiredu stated the move by the NIC is completely unnecessary and will just lead to avoidable job losses.
“What the law requires of the regulator to do is not what the regulator has done. What it has done is an arbitrary decision and it was based on the fact that BOG raised the minimum capital requirement. Raising the minimum capital is based on a certain formula and you haven’t done that but you are changing the laws from your offices.”
“Minimum capital is supposed to be liquid money. That money cannot be used for anything. It can only be touched with the approval of the regulator when there is an emergency. Brokers done don’t underwrite any insurance, so why should they provide minimum capital…this decision by the NIC is totally useless and unnecessary. We have to be progressive and not come out with directives that are retrogressive.”
Mr Wiredu added that the five insurance companies that are likely to be collapsed will lead to about 300 people losing their jobs.
The directive to insurance companies to recapitalise from GH¢15 million to GH¢50 million was issued in 2019 and meant to elapse in June 2021.
It was, however, shifted to the end of January 2022, as a result of the impact of the COVID-19 pandemic on businesses.