Insurance sector in new phase of development
Nigeria’s insurance industry may have begun a new phase of development with its recently inaugurated Insurers Committee.
The coming of this Committee, which provides a common platform for industry players and the regulator, the National Insurance Commission (NAICOM) to interact regularly (bimonthly) on issues bothering on market development and regulation would have been a major achievement for the sector at this point in time.
This platform will not only give players the ample opportunity to become part of the regulation, but also the benefit of hindsight on what the regulator is coming out with at any point in time, to enable its preparedness for it.
Nigeria, like many other jurisdictions has been faced with increasing regulation and regime of fines, particularly since the financial sector crises between 2008 and 2009, which exposed a high level malpractice in businesses across the globe, and how much investors’ money were exposed to these risks.
This development however, made the operating environment difficult for companies, as regulators became more aware of their responsibility to protect investors and policy holders by coming up with new regulations that bothers on risk management as well as corporate governance.
Today, the operators are feeling the impact, with regulators beaming their searchlight on their operations, requesting regular returns and reports, as well as increased board responsibility.
The effect has been regime of sanctions and penalties, which some have lamented, is killing and an anti-business development. The coming on board of this Committee may therefore be a major step in enhancing compliance and providing further, an opportunity for players to reach agreements with the regulators on policies that affect their business and how they can grow their market.
The insurance industry chief executives rose from its last ‘Insurers Committee’ meeting, held in Lagos resolving that transition roadmap to risk based supervision, which brings on the table end to common capital regime for the sector would be released in two months time.
The implication it noted is that insurance companies’ capital base will now be dependent on the value or specific area of risks they carry as a business, which is different from what obtains currently, where all the companies have the same statutory level of capital either as general or life business.
Consequently, effective April 1, the National Insurance Commission (NAICOM) will enforce the 2009 Corporate Governance Code, which is expected to guide the industry, pending when a new one would be adopted by the government.
Oye Hassan-Odukale, chairman, Sub-Committee on Publicity and Communication of the Committee joined by other Sub-Committee Chairmen said, having appointed sub-committees, “we are set to work together with the industry regulator to resolve most of the issues bothering on growth and development of our sector.”
He said efforts were in progress to look at challenges facing the industry and ensure that they are addressed in the interest of all stakeholders.
“We had the opportunity to listen to a presentation from a consumer perspective during the meeting today and what that has done for us is to see how we can improve on our services and relationship with the consumers,” Oye said.
According to the Committee, the risk based supervision roadmap will provide details on implementation plan, education and awareness, development, impact assessment, impact testing, among other stages.
“On risk based supervision, Oye said there would no longer be a common capital for insurance companies again. “You will now determine your capital based on the kind of business you are doing. It will now be from the board level, as the board will do some analysis and take decision on the risk appetite for their company, which will be appropriate for the kind of risk they carry.”
On regime of sanctions in the industry and how operators perceive it, Oye said, “You know, we have guidelines already, and not that the regulator just imposed the rate on us.
According to him, where the industry has major fines, he said the operators have been able to sit down with the regulators and it has been reduced. “I am sure they have been reduced because I have had some cases. “So in any industry that is regulated, there are rules and when you break the rules, there are consequences and that is what is happening.”
“Therefore, I don’t see the insurance industry as being different from the other industries, Oye argued.
Val Ojumah, chairman, Sub-Committee, on Corporate Governance and Government Relations also speaking on the fines and how comfortable operators are, said, “You know we have a code of corporate governance and everybody understands the detail. So, if you break the law there are consequences and everybody understands these consequences”.
“I do not agree that the fines are too much. Just know that the industry is getting better by the day and everybody is trying to comply with the rules and regulations.”Ojumah further stated that there will be errors made and there will be fines, so, what the regulator is trying to do is to ensure fairness.
Other Sub- Committee Chairmen appointed during the meeting includes Tope Smart, market development; Keith Alford, customer services; Femi Oyetunji, prudential; Eddie Efekoha, Technical and George Onekhena, regulations, representing NAICOM.
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