The current GH?15million minimum stated capital for insurance companies will see a ‘significant’ increase before end of December 2018, the National Insurance Commission (NIC) has confirmed.

“There will an announcement this year that will state exactly what the minimum capital is, and give a time for firms to raise the capital,” said Seth Eshun, Head of Supervision at the NIC.

Mr. Eshun made the announcement in an interview during the re-launch and rebranding of UT Life Insurance to miLife Insurance in Accra.

Although the NIC refused to mention exactly how much insurers will be required to raise, it said it is deliberately delaying the decision because it does not want a situation wherein insurers would have to compete with banks for funds to recapitalise.

“One of the reasons why we have delayed is that all these companies need to get money from shareholders and the capital market in order to recapitalise, and the banks are in the same market looking for the same capital.

“The banks are taking a lot of the capital within that space, so if we were also to bring in a capital increase then we would be competing with banks to raise capital. This would make it a lot more difficult for the sector to generate such capital,” he explained.

He added that: “So, we waiting on the banks to finish; and before the end of this year we will come out with what the minimum capital requirement is and give them a few years to recapitalise. This will ensure that the insurance industry and banks are not competing for the same capital.

“Over the past one-year experts have advocated a significant upward review of insurers minimum stated capital, with many blaming the low capital of companies for the low insurance penetration – at about 1.7 percent – as well as local insurers’ inability to underwrite big ticket transactions, especially in the oil and gas industry.”

As of December 2015, the Insurance Act required all insurance companies to have a minimum capital of GH?15million, but to date, some companies are understood to be still struggling to meet that requirement.

However, following the Bank of Ghana’s decision last year to increase banks’ minimum capital requirement from GH¢120million to GH¢400million – which banks are supposed to meet by December 2018, debates about the NIC also increasing that of insurance companies have become very topical in recent times.

Although yet to be made public, the increase is expected to trigger mergers and acquisitions, or the possible folding-up of many among the 53 life and non-life insurance firms in the country.