Of the 59 insurance companies operating in the country, only about a dozen are complying with laid down rules and regulations that have excluded them from being sanctioned by the National Insurance Commission, NAICOM.
The others are enmeshed in one form of unprofessional conduct or irregularity which continues to attract one form of sanction, fines or even penalty.
However, the National Insurance Commission, NAICOM, the regulatory body for insurance practice in the country has emphasised that it will be very firm in enforcing compliance with laid down rules and regulations in order to instil discipline in the sector.
Insurance operators are expected to carry out their businesses by abiding by some operational guidelines, principles and regulatory requirements such as compliance to risk- based supervision; transition to International Financial Reporting Standard, IFRS; solvency adequacy; early submission of financial results, and so on. However, only a handful is complying with all these.
For example, analysis of data of companies that have submitted their 2014 third quarter result to NAICOM show that only 15 have done so out of the 59 in the industry. These companies are Arm (Crystalife) Assurance; Cornerstone Insurance; Equity Assurance; FBN Life; Fin Insurance; Guinea Insurance; KBL (PHB) Insurance; Nigerian Agricultural Insurance Corporation; Old Mutual (Oceanic) Insurance; Old Mutual Life; Standard Alliance Life; UBA Metropolitan Life; Union Assurance; Wapic Insurance; and Wapic Life.
Lamenting this poor showing, Commissioner for Insurance, Mr. Fola Daniel said that some insurance companies do not submit annual accounts before Christmas.
Daniel said: “Whereas the Insurance Act 2003 provides for submission of annual accounts no later than 30th June, the requirement by the Nigerian Stock Exchange for listed companies is 31st March. The Commission had in the past continued to plead for the sector with other regulators for forbearance.”
According to him, going forward, insurance companies must comply with all requisite regulatory requirements without plea subsidies from NAICOM.
On solvency adequacy, Daniel said that from the audited financials of nearly a dozen insurance companies, solvency gaps are recurring features of their activities for as much as three consecutive years and appropriate regulation should have resulted in either suspension of the operating license and possibly withdrawal.
“The Commission had chosen to show some understanding against the backdrop of massive investment losses following the capital market crash of 2009/2010. Whereas other sectors have achieved reasonable recovery, insurers and NAICOM may no longer be able to invoke the excuses of the market crash as justification for the poor turn of event. The Commission shall therefore have zero tolerance for solvency gaps in the ensuing year in the interest of the insuring public and for the avoidance of exposure of NAICOM to regulatory risk,” Daniel said.
According to Daniel, the growth of the industry has remained constrained by the near total absence of risk management practice and appropriate product pricing amongst other issues plaguing the industry. “The consequence is massive loss of premium and wealth to stakeholder.
“No doubt, therefore, that the price of listed insurance companies rarely record market gain while shareholders have not received dividends in the past 3 – 5 years in 80 per cent of member companies,” he said.
On risk-based supervision and market conduct, Daniel said that NAICOM had issued the Risk Management Framework since 2012 preparatory to transition to Risk-Based Supervision, the recent report by Delloitte revealed that its implementation by insurers remains only on paper.
According to Daniel, some insurers complain of over-regulation and that the regime of fines and penalties has become punitive, which he described as most unfortunate, however, they are yet to demonstrate how regulation stifled the performance of insurance companies.
“It is pertinent to note that every report from international organisations and rating agencies have continued to rate the Nigerian insurance industry as being under-regulated. These organisations include; the International Association of Insurance Supervisors (IAIS), the Financial Stability Board (FSB), the International Monetary Fund (IMF), KPMG and Standard & Poors’. The assessment has taken several forms and different programs, one of which is the Financial Sector Assessment Programs (FSAPs) conducted by the IMF and World Bank.
“The last demonstration of under-regulation in the insurance industry was posted by Standard & Poors’ (S&Ps’) rating on Nigeria’s property/casualty insurance sector which; indicated a high industry and country risk assessment. The report rated “Nigeria’s institutional framework in insurance based on their assessment of two factors; (a) regulatory framework and track record, and (b) governance and transparency – as weak. Improvements in these factors have come only slowly and both started from a low base.”
Daniel said that the introduction of International Financial Reporting Standard (IFRS), the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) regime, the No Premium, No Cover, the requirement for offshore remittance, etc., has benefitted all insurers today, significantly curbing market abuses.
According to him, NAICOM will continue to create the right environment for ethical behaviour and conversely, where they identify actions detrimental to the interest of the industry; shall take corrective steps as part of their mandate.
“It is high time we all stepped up our game and learn to play by the rules. It is only by so doing that we can achieve real growth and development in the industry and make meaningful contribution to the economy,” Daniel said.
Also piqued by the position of the insurance industry in the financial sector, Mr. Felix Ohiwerei, former Chairman of Nigerian Breweries Plc said that insurance is an important arm of the economy and the nation is underplaying the value of insurance due to the inaction of players in the sector.
According to him, insurance operators have not pushed the industry enough to attain the level it deserves, hence he charged operators to be more active and visible so that young people can take on insurance and understand what it is about.
