(Sundiata Finance) – Insurance regulator, the National Insurance Commission (NAICOM) has disclosed its readiness to embark on a review of the minimum capital requirement of insurance companies to bring efficiency and qualitative service in the sector.
The review will enable the commission understand the true capacity of all the companies and what level of risks each can carry, based on their capital, Mohammed Kari, commissioner for Insurance and CEO of NAICOM has said.
“What we want to do is to make companies operate within the size of their capital. For instance, if what your capital qualifies you to underwrite is Keke Napep, you do Keke Napep, and if what yours qualifies you for is oil and gas or aviation, you do that. Not that a company whose capital is for only Keke Napep will be busy bidding for aviation businesses. That is what we want to stop,” Kari stated.
Kari said, this is in line with the industry’s transition to Risk Based Capital (RBS), for which the next phase of implementation is expected to commence before the end of the year.
Mohammed Kari, in his speech at the 2017 Insurance Professionals Forum held in Abeokuta with the theme ‘Solvency, Stability and Growth-Exploring Possibilities’ said “we have to agree that insurance growth forecasts in recent times have remained uncertain due to continuing global tensions and fragilities.”
He stated that although numerous insurers have already begun to transform their business models in response to the changing business environment and successive regulations, they are now confronted with a future of weak demand and rising costs. Improving future growth prospects and market share and achieving a good return on capital – while reducing unnecessary inefficiencies and costs – are beginning to emerge as the short to medium term norms for most insurers.”
Kari further stated that the industry has indeed undergone a series of changes which have had a considerable effect on efficiency, positive productivity change, stability, market structure and performance, that have attracted foreign investors in the process.”
Kari said the implementation of Solvency II in Nigeria will no doubt present a true picture of the risk proﬁles of the insurers, while fostering an improvement in the culture of risk management, as it aims to ensure that there is adequate understanding by insurers of the inherent business risks in the industry and the allocation of sufficient capital to mitigate them.”
He said insurance institutions must therefore, review and where necessary, enhance their capital, risk management and governance, in order to survive the interesting future ahead. Barring hindrances such as high costs of implementation, paucity of requisite data and skills and political obstacles; we posit that an intelligent implementation of a strategic consolidation in Nigeria will boost the overall performance of the industry and position it as one of the foremost in the continent.
Meanwhile, Sunday Thomas, deputy commissioner for Insurance, Technical, NAICOM said the Commission has concluded arrangement to commence next phase of risk based supervision (RBS), having identified ten insurance companies for test-run.
“We are going to test-run our model with these few companies and that will happen before the end of the year”.
According to him, the information from this exercise will not be used for any regulatory purpose, so affected companies should not be afraid, it is only for test running of RBS implementation.
Funmi Babington-Ashaye, president, Chartered Insurance Institute of Nigeria (CIIN) said as insurance, like other sectors of the economy, grapples with happenings and distortions in the financial and global environment, insurance companies and practitioners should explore strategies that will ensure that their entities remain solvent and are able to weather the storm, irrespective of the dynamics of the business environment.
“As an industry that indemnifies investors and risk takers, insurance underwriters must remain stable, strong, resilient and financially solvent enough to meet emerging obligations.” (BusinessDay)