Insurance sector regulation nearing convergence’
The internationalisation of insurance business through common regulation and global competitiveness, insurance environments like Nigeria would have to face compliance complexities, analysts have said.
This is coming as insurance regulators globally align with common believes in line with changing environment and increasing investor risks.
Fola Daniel, commissioner for insurance, said during a meeting with journalists that Nigeria, like other countries, is going through regulatory reforms, which are all targeted at strengthening consumer protection through risk management.
“What we are doing here is not different from what other markets are doing because we all belong to an association of global regulators – Association of Insurance Supervisors (IAIS), and there is a regulatory template we all have to adopt,” Daniel said.
He said there is already a convergence of regulation and Nigeria cannot afford to be left behind, stating that risk based supervision is the way to go.
Mohammed Kari, deputy commissioner for insurance, technical, at a seminar on introduction of the risk based supervision in Nigeria held in Lagos, said although some industry observers may see the various reforms as becoming too many, it is aimed not only at protecting the insuring public, but also to stabilise the industry.
“Don’t see this as trying to introduce or push a new concept down your throats. We see it as an opportunity to imbibe the culture of Risk Based Management. Regulation or no regulation, directors and management must accept their responsibilities to their shareholders, policyholders and all other stakeholders”, he explained.
The release in December 2014 of the International Association of Insurance Supervisors (IAIS) consultation paper on a risk-based global insurance capital standard (ICS) marks a significant milestone in the journey towards consistency in the assessment of global insurance groups, KPMG analysts have said.
According to them, unlike banking, the insurance sector does not have a global regulatory framework, resulting in bespoke regulatory requirements in each jurisdiction.
KPMG stated that while the ICS will only apply to international groups, it has long supported any move to reduce duplication and inconsistency in regulatory requirements.
“Unfortunately, we are concerned that the ICS, as presently proposed, could just add another layer of complexity and does little to address this issue, since its application is solely at the group level and legal entity regulatory requirements will be unaffected.”
Summarily, KPMG thinks that supervisors are increasingly looking beyond the boundary of the regulated insurer to the wider group and holding company operations; new governance, reporting and capital requirements will be enacted around global requirements; systemic concerns are not abating and additional laws are likely to be named and subject to increasingly intrusive requirements; expansion of the requirements to domestically significant insurance operations is likely to follow; critical functions are viewed as part of essential services which must be maintained or run down in an orderly fashion.
Insurers will need to invest more in resolution and contingency planning as a result.
Besides, boards must be able to demonstrate that their risk governance procedures, especially in regards to risk culture, permeates all levels of operations, sales and management; conduct regulation will continue to increase and will be expanded to product design, marketing and incentive policies.
These developments arose from the events of the Global Financial Crisis, where the financial stability board (FSB), acting on a mandate from the G20, sought better supervisory outcomes for all systemically important financial institutions and requested the IAIS (as the insurance international standard setter) to develop an appropriate insurance response for the supervision of Global Systemically Important Insurers (G-SIIs).
Modestus Anaesoronye