NAICOM can’t increase insurance firms’ paid up share capital without NASS, court rules

The Federal High Court in Lagos has held that the National Insurance Commission (NAICOM) cannot increase the statutory minimum solvency capital policy for Insurance companies without the National Assembly amending the Insurance Act and Regulation 2003.

Justice Chukwujeku Aneke made the order in a judgment on July 14, 2022.
The judge further directed NAICOM to reverse itself on the increase in the statutory minimum solvency capital policy for Insurance Companies.
He held that the directives/guidelines/circular on capital base increase offends Section 4 of the 1999 Constitution and Section 9 of the Insurance Act and Regulation 2003.

The court made the orders in a suit marked FHC/L/CS/1518/18 between Tope Alabi as the plaintiff and the National Insurance Commission and the Attorney-General of the Federation (AGF) as 1st and 2nd defendant.

The suit followed NAICOM’s announcement in 2018 that it planned to release the Guidelines for the implementation of the minimum solvency capital policy in August, 2018; while implementation was meant to take effect from January 1, 2019.
NAICOM, on August 27, 2018, released a Circular with No. NAICOM/DAPCIR/14/2018 wherein it divided the categories of business for insurance companies as provided for in the Act into tier-based respectively.
The plaintiff averred that it prescribed tier-based minimum solvency capital for insurances on the bases of their respective risks profiles and their risks management systems. The Circular reflected an insurance of life Insurance Business to N6 Billion; Businesses to N3Billion; and oil and gas Insurance Business to N9 Billion respectively.

On September 28, 2018 the Plaintiff filed an Originating Summons in which he sought the determination of whether NAICOM can unilaterally increase the statutory minimum solvency capital policy for insurance firms, “as contained in Section 9 of the Insurance Act and Regulation 2003, by a mere circular without an amendment to the enabling Statute by the National Assembly to increase such capital base.

“Whether the increase in the statutory minimum solvency capital policy for all Insurance Companies and the short or inadequate time within which to comply was not steps taken by the 1st Defendant in bad faith,” among others.
The Plaintiff also sought the five reliefs numbered A to E.

Reliefs A and D reads: “A declaration that the 1st Defendant lacks vires to unilaterally increase the statutory minimum solvency capital policy for Insurance Companies in Nigeria, as contained in Section 9 of the Insurance Act and Regulation 2003, by a mere circular without an amendment to the enabling Statute by the National Assembly to increase such capital_base_pursuant to Section 4 of the Constitution of the Federal Republic of Nigeria, 1999 as altered.

“AND ORDER of this Honourable Court directing the 1st Defendant to reverse itself on the increase in the statutory minimum solvency capital policy for Insurance Companies Nigeria on ground that the directives/guidelines/circular on capital base increase run fouls of the provisions of Section 4 of the Constitution of the Federal Republic of Nigeria, 1999 as altered and Section 9 of the Insurance Act and Regulation 2003.”

The plaintiff, a lawyer, represented himself. The first defendant was represented by O. Omole while the 2nd defendant was represented by E. Udoh.
The defendants challenged Alabi’s locus standi to institute this suit. The 2nd defendant also prayed the court to strike out its name from the suit.
Granting the plaintiff’s prayers, Justice Aneke noted Section 9(1) Insurance Act which states that: (1) No Insurer shall carry on insurance business in Nigeria unless the insurer has and maintained, while carrying on that business, a paid-up share capital of the following amounts as the case may require, in the case of –

(a) Life insurance business, not less than N50,000,000; (b) General insurance, not less than N200,000.00; (c) Composite insurance business, not less than N350,000,000; or (d) Reinsurance business, not less than N350,000,000.00.
He held: “After reading the above sections especially Section 7 of the National Insurance Commission Act, I am of the view that the 1st Defendant, the National Insurance Commission, acting under the National Insurance Commission Act, have no powers to increase the paid up share capital of the various categories of insurance companies stated in Section 9(1) of the Insurance Act because such increase will be inconsistent with Section 9 of the Insurance Act.
“I am fortified in this view by Section 61 of the National Insurance Commission Act. I am also of the view that the 1st Defendant has no vires to divide insurance companies into tier levels.
“I also hold that the Plaintiff has the locus standi to institute this suit.

“Finally, I grant reliefs A and D claimed by the Plaintiff. All other reliefs are hereby dismissed.
“I make no Order as to costs.”