Background

1. As part of on- going efforts to stabilise, strengthen and enhance the capacity of the financial services sector to support socio-economic development, the National Insurance Commission has revised the Minimum Capital Requirements of all insurance entities.

2. The new Minimum Capital Requirements for the insurance industry will help strengthen the balance sheets of regulated insurance entities, thereby enhancing their underwriting capacity, make resources available for investment in essential technology and the development and distribution of appropriate products which will help increase insurance penetration. lncreasing the Minimum Capital Requirement is only one of a number of steps being taken by the NIC to develop a robust insurance industry. Other steps include improving strengthening the regulatory framework, implementation of Risk Based Supervision and solvency requirements, strengthening risk management and Corporate Governance structures and practices within the industry and thus improving the claims payment culture.

3. Risk management is at the core of insurance. lnsurance entities must therefore ensure that they are adequately capitalized to bear the risks they underwrite. The capacity of an insurance company to accept risk, among others, depends on the financial strength of the company.

4. Currently, there are 142 regulated insurance entities made up of 24 life insurance companies, 29 non-life insurance companies, 3 reinsurance companies and 85 insurance brokers and loss adjusters. The total assets of the insurance sector as at 2018 are in excess of GHS6 billion and the total Gross Written Premium is about GHS3 billion.

New Minimum Capital Requirement (MCR)

5. Since 2017, the NIC has been holding consultations with various stakeholders on the revision of the MCR, having regard to the developments in the financial landscape.

6. The table below summarizes the previous and new minimum capital requirements for the different regulated entities that operate in the insurance sector.

7. To ensure that the capitalization exercise achieves its intended objectives of improving the financial capacity and liquidity of the insurance industry, (re)insurance companies will be required to meet the new requirements through:

a. Fresh capital (cash) injection,

b. Capitalization of audited profits (retained earnings)

c. or a combination of the above options,

8. Injection of property will not be accepted. Any unencumbered property that is introduced will have to be sold for cash by at least six months before the capitalization date, that is, December 31,2020.

9. The following are the key implementation points on the new MCR:

a. The MCR will be immediately applicable to all new applicants and pending applications.

b. Existing firms will have until June 30, 2020 to comply with the new MCR.

c. The Commission would improve on its Risk Based Solvency Capital approach to ensure that in addition to the MCR, the capital of a firm is commensurate with the risks it bears.

10. ln order that existing entities would have time to comply with these revised MCRs with minimum disruption to their operations, the Commission sets out the following timelines:

Conclusion

11. The mandate of the Commission is to protect the interest of policyholders by ensuring a financially strong insurance industry. The new MCR is one of the initiatives the Commission is taking to achieve this. The Commission strongly urges Shareholders, Directors and Executives of all insurance entities to take all proactive steps to meet the new capital requirements by the set date.

12. The Commission will work with all industry players and provide the needed assistance to help the industry meet the new MCR. This will help Ghana 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.

13. Please contact the NlC on info@nicgh.org or 0302238300/1, if further clarification is required.