The National Insurance Commission (NIC) has given some insurance companies until February 6, 2022 to recapitalise their businesses to the tune of GHC50 million or face closure and handover.
These companies have also failed to raise their capital adequacy ratio to 150 percent, as required by an earlier directive, according to the industry regulator.
The concerned companies have been notified through notice since January 6, 2022 and failure to comply will result in their collapse, huge layoffs, loss of investments, and disruptions in the insurance industry.
The companies who were unable to raise the capital had violated Section 59 of the Insurance Act 2021, according to the NIC (Act 1061).
“Pursuant to Section 178 of the Insurance Act, the Commission, by this letter, issues a one-month notice of enforcement to [name withheld] effective January 12, 2022. For the purposes of protecting your policymakers, the entire insurance industry and the general public, you are will be placed under enforcement with effect from February 10, 2022,” the notice had indicated.
Reports say that more than five companies are involved, raising the stakes for joblessness and disruptions in the insurance and banking industries in general.
No new contracts
Affected organisations were also cautioned not to enter into new contracts for any type of business, renew current contracts, change contracts, or engage in any marketing efforts, according to the letter.
It also ordered the companies to stop selling their items through their employees and agents.
“You are, however, required to service existing policies until expiry. Payments must only be for claims, salaries, statutory requirements and other essential management expenses but with prior approval from the NIC,” it cautioned.
It also cautioned the companies’ boards of directors and management that they would be held accountable for any liabilities arising from new contracts.
The directive to recapitalise insurance businesses from GHC15 million to GH50 million was issued in 2019 and is set to expire in June 2021.
However, because to the impact of the COVID-19 pandemic on businesses, it was extended till the end of January this year.