Insurance commission suspends capital requirements, CAR for insurance firms amid Domestic Debt Exchange Programme

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The National Insurance Commission (NIC) in Ghana is taking steps to mitigate the impact of the Domestic Debt Exchange Program on insurance companies by suspending the Minimum Capital Requirements (MCRs) and Capital Adequacy Ratio (CAR) for two years.

According to a letter from the Commissioner of Insurance, Dr Justice Ofori, the NIC will place a moratorium on the MCRs and CAR to alleviate the burden on insurance companies during the program, but they will be required to operate in a manner that allows them to pay claims and expenses.

The current MCR for life and non-life insurance companies is 50 million Ghanaian cedis, while the CAR is 14.2%.

The NIC has also proposed that insurance companies be given up to four to five years to write off day-one losses on the new bonds, which would depart from accounting standards that require such losses to be written off on day one.

In addition, the NIC will issue a framework to guide the re-pricing of insurance products in response to changes from the Domestic Debt Exchange Program, and it will also increase the number of working days for non-life and life claims to be paid from five to 15 days, with a maximum of eight weeks for all processes leading to payment of claims.

The regulator will also release up to 50% of the minimum Statutory Deposit to eligible regulated entities for the payment of claims, which must be replaced within two years.

The NIC has stated that guidelines will be developed to guide the operation of regulated entities during the moratorium period and that the forbearances will be available to those that follow the operational guidelines.

Other measures being taken by the NIC include a reduction in NIC product approval fees by 40%, a postponement of the implementation of IFRS 17, and the creation of regulatory “assets”.

“A set of guidelines will be developed and issued to guide the operation of regulated entities during the moratorium period. These forbearances will be available to be regulated entities that abide by the operational guidelines that will be issued,” said Dr Justice Ofori in the letter.

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