Anxiety over when the minimum capital regime will be announced by the National Insurance Commission (NAICOM), is gradually engulfing the entire insurance industry atmosphere as the operators and other stakeholders are anxiously waiting for the pronouncement.
The reason being that the Consolidated Insurance Bill 2024 which has been in the National Assembly for about 10 years has to be passed into law and assented by the president prior to any announcement by the NAICOM, reports Daily Independent.
It was noted that even the stakeholders are becoming apprehensive on when the new capital will come into force asking questions on when it will be announced.
The tide, it was learnt, lies on the passage of the Bill into law by the National Assembly and eventual assent of the President and Commander-In-Chief.
Although, NAICOM has already issued draft guidelines on the Risk Based Capital (RBC) for inputs by stakeholders, the Commission is still awaiting the passage of the bill to enable its final decision on how much will be suitable as a minimum capital for insurance companies in their various portfolios considering the proposed risk based capital regime.
At a forum organised by Mettlehouse Consulting on the RBC, in Lagos recently, the shared position by the participants was that operators should work toward N40billion minimum capital threshold as the journey has begun.
Citing the shared draft guidelines, they noted that RBS would encourage Life and General business portfolio to be distinct advocating that those holding composite licences should begin to process separate licenses for the two portfolios as soon as possible.
Also participants were urged to think and advise their leadership whether the company is going into life or general while companies were also advised on the need to submit themselves to ratings in a view to positioning the firm in a better stead internally through external opinions.
“Do your ratings to position your company in a better stead internally through external opinions,” the communiqué noted.
Stakeholders Favour RBC Model
The need for insurance industry in Nigeria to galvanise a new capital regime that will uplift the status of the industry and provides financial succor in their operations cannot be over-emphasised due to the current economic realities pervading the entire global business spectrum globally Nigeria inclusive.
Stakeholders, who converged in large numbers in Lagos critically looked into the very essence of bringing the Risk Based Capital model to Nigerian insurance market and unanimously agreed that RBC model would readily suite their various risk appetite as a panacea to evolving failures of most companies that cannot meet the traditional financial obligations to their customers.
Experts, who identified the RBC as a safe landing for the operators underscoring critical challenges that necessitate immediate attention and proactive measures, noted that the new capital model if well implemented would ensure that operators accept risks according to their capital level.
Top contention was the presumptuous risks exposure of the operators which, according to them, will determine their associated risks appetite as against a situation where an insurance company with inadequate capital layout will be chasing high ticket risks, indulging in underpricing of risks and at the end of the day gets his fingers burnt to the detriment of the policyholders.
Ms Prisca Soares, former Secretary General, African Insurance Organisation (AIO) who presented the key note address underscored the imperative of adopting the RBC model in the sector, posited that it is critical in global insurance standing.
Bola Odukale, the Director General, Nigerian Insurers Association (NIA), emphasised the need for collaborative effort in a quest to discuss the various steps to achieving RBC by the industry noting that collaboration is important in navigating this critical journey. She called for more resilience by all stakeholders.
Ahmed Kunle, chairman, NIA, underscored the importance of RBC adoption in Nigeria’s insurance industry as he urged the operators to leverage every platform that would spring to discuss this all important issue.
Barineka Thompson, CEO Mettlehouse Consulting, noted that RBC is coming soon after IFRS 17, methodology approach on Risk Based Supervision (RBS) while acknowledging that the evolving regulations.
On what operators need to know, the Mettlehouse CEO, dueled on Pillar 1 highlighting quantitative requirements, technical provision, capital requirements, MCR, SCR and own funds.
He pointed out that while Pillar 2 speaks to internal control, governance system, risk management, own risk and capital assessment, ORSA and supervisory review process, Pillar 3 emphasised disclosures and market discipline, supervisory reporting, public reporting, and transparency.
Continuing, he added that risk based approach would develop capacity and technical skills of firms and supervisory agencies, aligns incentive to business actions, while encouraging and rewarding actions that move towards market development outcomes.
He stressed that strengthening of governance mechanisms of insurers, will enhance policyholder confidence and protection as he emphasises the need for board members to know the nitty kitty of RBC and why they should implement Enterprise Risk Management (ERM) among others.
Mr Segun Omosehin, the Commissioner for Insurance (CFI) is concerned about the soundness of insurance companies in the face of current realities where some companies could not meet their claims obligations.
According to him, the Commission’s priority is to ensure that companies are financially sound enough to meet their internal and external obligations, pay genuine claims as and when due and are able to play according to their risk appetite at the marketplace.
“Our priority has to do the soundness of our operators. We want to see our operators meet their obligations and this involves taking some creative actions and ensuring that we do proper oversights of these entities. It may also involve lifting the minimum to a level that can encourage some level of comfort in the sector. The desire is to see an industry that is respected and can meet their obligations.
“We are very mindful of the positions we have while also desire to see the sector that is financially sound. One key mandate of a regulator particularly the financial services sector is our core mandate of ensuring that there is stability in the financial system. And that is one key area we are committed to.
“I will like to speak to the issue of accessibility and penetration of the market. These are enforcement of our compulsory insurances, how it can be efficient and make progress.
In the overall, one key element that we are very focus on is to restore public trust and confidence in the insurance sector.
