The Domestic Debt Exchange Program’s effects on insurance businesses are being lessened by Ghana’s National Insurance Commission (NIC), which has suspended the Minimum Capital Requirements (MCRs) and Capital Adequacy Ratio (CAR) for a period of two years.
In order to lessen the burden on insurance firms throughout the program, the NIC will put a moratorium on MCRs and CAR, but they will still need to operate in a way that permits them to pay claims and expenses, according to a letter from the commissioner of insurance, Dr. Justice Ofori.
The current MCR for life and non-life insurance firms is 50 million Ghanaian cedis, while the CAR is 14.2%.
In addition, the NIC has suggested that insurance companies be permitted up to four or five years to write down day-one losses on the new bonds, which would deviate from the requirement in accounting standards that such losses be written off on the first day.
A framework for re-pricing insurance products in response to adjustments made under the Domestic Debt Exchange Program will also be released by the NIC.
Additionally, it will raise the number of working days needed to process and pay life and non-life claims from five to fifteen, with a maximum of eight weeks.
For the settlement of claims, which must be reimbursed within two years, the regulator will additionally release up to 50% of the minimum Statutory Deposit to qualified regulated firms.
“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.
According to the NIC, operational guidelines will be created to direct how regulated firms should conduct themselves during the moratorium period, and those who adhere to the operational standards would be eligible for forbearances.