A new policy by the National Insurance Commission has placed an embargo on all insurance companies from investing in any business outside the country.
Insurance firms are also prohibited from investing their income in their parent’s companies.
These details are contained in new guidelines prepared by NAICOM for insurers and re-insurers in Nigeria.
Section 3.4.2 under sub-section H of the new policy states, “Insurance funds shall not be invested offshore.”
Section 3.4.1 under sub-section D of the guidelines also indicates that “no insurer shall invest its funds in its parent company.”
According to the new policy, no insurer shall invest in derivatives without obtaining an approval from the commission. And not more than 20 per cent of the total current account balances and bank placements shall be placed in any one bank.
It also states that no insurer should invest in any company that had neither reported profits nor paid dividend in the last three years.
NAICOM has ordered that no insurer should outsource its investment functions without an approval from the commission.
It, however, said insurance firms could invest in banks’ acceptance and commercial papers guaranteed by an issuing bank.
Similarly, the commission said insurers were free to invest in debt instruments issued by the Federal Government or the Central Bank of Nigeria, as long as such securities could meet certain conditions.
The conditions, according to NAICOM, included securing the approval of the Securities and Exchange Commission; and the instruments must be readily marketable and issued in accordance with existing regulations.
Insurance will also be allowed to invest their funds in debt instruments issued by state governments provided such securities have the full guarantee of the Federal Ministry of Finance, according to the guideline.
NAICOM warned that insurers must not invest their funds in shares or any other securities issued by a shareholder of an insurer, subsidiaries of associates, joint ventures and affiliates of the company or its shareholders.