Insurance companies that will be unable to recapitalise to the mandatory GH¢50 million by the January 31, 2022 deadline are set to lose their licences, prompting fears of massive job losses in the coming days.
By failing to recapitalise, the insurance sector regulator, the National Insurance Commission (NIC), says the companies have also failed to move their capital adequacy ratio (MCR) to 150%, as required by the earlier directive.
The extent of the job losses and the number of insurance companies to be affected by the recapitalisation directive will be known after February 6, 2022, as the NIC extends the deadline for the defaulting companies.
After this extended deadline, defaulting insurance companies will have to close shop and hand over their operations.
Many fear revoking the licences of defaulting companies would trigger mass layoffs, loss of investments and disruptions in a financial sector that is recovering from the recent clean-up exercise.
An avenue for patient capital, the insurance sector employs thousands of people as permanent employees or contract staff or agents to sell insurance products.
Experts say the order to cease operation, which was signed by the Commissioner of Insurance, Dr Justice Ofori, and the uncompromising position of the NIC in the midst of the devastating effects of the COVID-19 pandemic on businesses, could cause panic among the insuring public, send hundreds back home and worsen the hardship situation in the country.
In the notice sent to the affected companies, the industry regulator said the companies that are unable to raise the capital have breached Section 59 of the Insurance Act 2021 (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 that was issued to the companies said.
More than five defaulting insurance companies have been marked to lose their licences, according to multiple sources, raising the stakes on the impact to joblessness and disruptions to the insurance sector and the financial sector in general.
The notice further warned affected companies not to enter into new contracts for any class of business, renew any existing contracts, vary contracts or engage in any marketing activities.
It also ordered the firms to stop their staff and agents from selling their products.
“You are, however, required to service existing policies until expiry,” the notice said, adding that payments must only be for claims, salaries, statutory requirements and other essential management expenses but with prior approval from the NIC.
It also warned the boards and management of the companies that they would be held liable for liabilities resulting from new contracts entered into.
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 from 31st December 2021 to the end of January 2022, as a result of the impact of the COVID-19 pandemic on businesses.