Changing regulation focuses on protection of policyholders, beneficiaries
The global insurance industry, including Nigeria, has been witnessing a new wave of regulation that tends towards protection of the policyholders and beneficiaries in insurance contract. This change is fundamentally reshaping the insurance industry, creating strategic and operational challenges and opportunities
While this no doubt is putting a lot of pressure on insurance companies and their operations, regulators say that is the only way to go to reduce the heightening risks of investment.
The primary purpose of the risk management regime is the protection of policyholders and beneficiaries, Fola Daniel, commissioner for insurance, said.
Daniel said in view of the changing trend and the importance of insurance in helping to galvanise the optimal performance of other sectors, NAICOM’s role is to facilitate the orderly conduct of insurance business through appropriate regulation.
“In this regard, we have historically implemented the requirements of the law as it concerns minimum capital requirements for operation of insurance companies, consumer protection, solvency and orderly exit of companies,” he said.
Thompson Barineka, director inspectorate, NAICOM, said in a presentation that section 40 of NAICOM Act requires appropriate steps to be taken for the purpose of protecting policyholders or potential policyholders of an insurance institution against the risk that the insurance institution may be unable to meet its liabilities or fulfil the reasonable expectation of policyholders or potential policy-holders.
Citing other markets including Mexico, India, America, Europe, the Middle East and other parts of Africa, Barineka pointed out that while Nigeria is not alone in the game, there are other markets at different levels of regulation as there are global standards on regulation.
According to him, NAICOM will remain focused on the issues relevant to the protection of policyholders, growth of the insurance sector and promote financial stability.
“Insurers must keep pace with evolving regulations, which are becoming more stringent, affecting everything from capital requirements, to commission rates and customer care,” he explained.
Increased demand for stiffer regulation on the insurance industry started after the global financial crisis of 2008/09, coupled with the spending of $184bn by US Government as bailout of the insurance giant AIG, leading to heightened calls to regulate the global insurance industry and the globe’s biggest banks.
Recently, the Financial Stability Board named nine global insurers as “Global Systemically Important Insurers”. These insurers now face the prospects of closer regulatory scrutiny and tougher capital standards.
Others reasons include widespread failures in financial regulation and supervision; failures of corporate governance and risk management at many systemically important financial institutions; excess borrowing, pay and bonuses and failure of credit rating agencies; and failure in the performance of the board of directors leading to systemic breakdown in accountability and ethics.
Modestus Anaesoronye