The Nation Newspaper

Category: Insurance

  • AIICO partners AutoGenius on ‘Taxify Cover’

    AIICO partners AutoGenius on ‘Taxify Cover’

    AutoGenius, one of Nigeria’s first digital insurance platforms, has unveiled an insurance policy tagged ‘Taxify Cover’ designed to increase driver and rider safety as well as improve the confidence of their user base.

    Taxify Cover, launched with AIICO Insurance Plc, is a comprehensive motor Insurance. It is a special motor insurance product (bundled products) that is customised to provide all the benefits of a comprehensive motor insurance with extended passengers’ liability, loss of personal effects and personal accident covers with a single premium.

    General Manager, Non-Life Business, AIICO, Adewale Kadiri, said the policy is a special Comprehensive Motor Insurance product customised to provide all the benefits of a comprehensive motor insurance with extended passengers’ liability, loss of personal effects and personal accident covers with a single premium.

    He explained that AIICO would provide the underwriting service while AutoGenius will provide the channel and technological platform for the distribution of the product.

    ‘’We are indeed optimistic that this initiative will further expand the insurance market in Nigeria and increase market penetration.

    He said: “The features of this product, among others, are the provision of compensation for accidental damage, third party bodily injury/property damage, theft and fire damage to the vehicle, death/disability/assault to the driver and rider, passengers’ liability and loss of personal effects for the driver and the rider’’.

  • ‘N167b annuity transfer order is a blessing to insurers’

    Lagos State Pension Commission (LASPEC) former Director-General,Rotimi Hussain, has urged life insurers in the country to accept the mandate given to them by the National pension Commission (PenCom) to transfer N167.84 billion annuity fund belonging to about 34,312 annuitants to Pension Fund Custodians (PFCs), describing the transfer as a blessing to the insurance industry.

    He made this call at the fourth edition of BusinessToday Insurance & Pension Awards in Lagos. It had as  theme, The current Annuity fund arrangement – a threat or blessing to insurers.

    He charged the insurers to engage more with the National Pension Commission (PenCom) on development of rules and management of pension funds through their group, the Nigeria Insurers Association (NIA) and the National Insurance Commission (NAICOM).

    He urged insurers to accept that the arrangement would correct the public perception that insurers have full autonomy over annuity. He observed that the other blessing in the arrangement was that it would build public confidence and attract more people into buying annuity and growing the fund.

    He stressed that the domiciling of the annuity fund with Pension Fund Custodians would also stem the demarketing of annuity as it would provide a level playing field for insurers and Pension Fund Administrators (PFAs), stressing that the arrangement would lead to safety of pension funds.

    He said: “The confidence to be achieved through the new arrangement, will help attract the private sector to annuity business, hence, enhancing the insurance market share.

    “Insurers need to leverage the opportunities to be created by the new arrangement by being aggressive and innovative in the pursuit of their business.”

    Group Managing Director, Royal Exchange Plc, Auwalu Muktari, said one critical success factor in the interplay between PenCom and NAICOM was the umbrella body of insurance firms in Nigeria, the NIA.

    He pointed out that it was important that the industry spoke with one voice and presents a unified front in the campaign to ensure the annuity funds remain with the life companies.

    He stressed that under the new guidelines recently issued by PenCom and NAICOM, the annuity funds from all insurance companies who issue annuity policies will be transferred to PFCs of their choice, adding that this amounts to over 34,312 annuitants having their funds, N167.84 billion, leaving the insurance industry and moving to the designated PFCs.

    Muktari asked how do the insurance companies would compensate for the drop in profit. “The new guidelines issued by NAICOM and PenCom make no mention of insurance agents and brokers. Who will pay the insurance broker or agent their commissions and from which premium, since the funds have been transferred to the PFCs? Let us all remember that brokers and agents play key roles in the sale and distribution of insurance products in Nigeria.

    The Commissioner for Establishment, Training and Pensions, Dr. Benson Oke, commenting on the theme, noted that Section 7 of the Lagos State Contributory Pension Scheme Law of 2007 recognises annuities as one of the investment options to which retirement savings account can be put.

    “From a social welfare governance perspective, annuities represent a responsible and effective tool that ensures the availability of funds to pensioners in a regular and prudent manner.

    “I call on all stakeholders in the insurance and pension industry to embrace and utilise all tools that promote effective management of the funds available for pension purposes,” he said.

     

  • WAICA Re posts $49.6m premium income

    WAICA Reinsurance (WAICA Re) Corporation Plc has recorded increase in its premium income from $33.5 million in 2015 to $49.6 million, representing about 35 per cent growth, the Managing Director, Abiola Ekundayo has said.

    He made this known to reporters in Kampala, the Ugandan capital on the sidelines of the just-concluded 44th African Insurance Organisation (AIO).

    He said WAICA Re is a Sierra- Leone-based and the reinsurance firm of the West African Insurance Companies Association.

    He said the reinsurance firm  achieved growth, despite the setback from Nigeria and Sierra Leone on fluctuation of the currency, noting that the naira has reduced Nigeria’s insurance premium income by 50 per cent.

    According to him, WAICA Re has over N2billion insurance pool invested in its Nigerian account, which has suffered depreciation as a result of the fall in naira value.

    ‘’At the close of the business last year, we lost about $6.5 million to exchange loss but emerge with a profit of $6.3 million,’’ he added.

    Ekundayo said: “We had a lot of challenges last year especially from Nigeria because of the devaluation of the currency. The premium income of Nigeria reduced by almost 50 per cent because we report in dollars.

    “We kept a lot of money in Nigeria including the money inherited from the pool were invested in Nigeria. We had over N2 billion, which faced the fall of the currency from N198 to N305 to a dollar.  There was also devaluation of the currency in Sierra Leone as a result of the problem they had with Ebola.

     

  • Association mentors pupils on insurance

    The Professional Insurance Ladies Association (PILA) has designed a mentoring programme for secondary school pupils to guide them through their career path as they pitch tent with insurance, its President, Mrs Jocelyn Ogbuokiri has said.

    She made this known at the  Career Talk for Secondary School Students organised by the Association in Lagos.

    She said the year’s theme, “Empowering the next generation of insurance practitioners” was carefully thought out to reflect their passion to adequately equip the young generation with the requisite knowledge and counselling that will enable them effectively take charge of the industry in Nigeria in their time.

    She said: “Deepening insurance awareness, appreciation and understanding among the young generation is one of the cardinal objectives of PILA. The Career Talk is one of the ways we aim at achieving this purpose.

    “Besides providing avenue for better appreciation of the workings of insurance as a life tool, the Career Talk also provides a very good boost for the upcoming generation to decide for insurance as a career having had the opportunity of interacting first hand with very successful professionals.

    “We hope that you will appreciate insurance as a profession in addition to the practical mentoring opportunity available beyond this career talk event.’’

  • NAICOM: so far, so good

    NAICOM: so far, so good

    Government’s general attitude to insurance has improved in the past two years, Commissioner for Insurance, National Insurance Commission, Mohammed Kari, has said.

    Under President Muhammadu Buhari’s administration, the NAICOM-  Help Desks at Ministries, Departments and Agencies (MDAs) have been functional, and the regulator has ensured that government’s  assets are fully insured and comply with compulsory insurance law.

    The Commission also started the enforcement of public building insurance, forged strategic alliance with the Securities and Exchange Commission (SEC), Central Bank of Nigeria (CBN), Federal Fire Service among others to deepen insurance penetration.

    The Commission also extended its scope of regulation on operators and rolled out the agenda and expectation of the Federal Government on the sector.

    Kari in a document to operators in January, highlighted regulatory and supervisory priorities of the Commission for the year and sought to acquaint insurance institutions with the issues which will receive special regulatory attention in the year.

    These include Market Development, Capital Verification; Management Expenses of Insurance Companies; Statutory Returns; Risk-Based Supervision; Information Technology; Competence of directors, Senior Management and Persons in Control Functions; Corporate Governance and Service Delivery by the Commission.

    He said this will enable the institutions prepare for the changes that may be required, saying this is without prejudice to right of the Commission to prioritise any issue it considers appropriate during the course of the year.

    Kari said the recession, and other dynamic business drivers, including improvements in best practices and standards and peculiar conditions of the Nigerian insurance industry, have created the need for high level of prudence, innovation, proactivity, and agility in both operations and regulations of the Industry.

    He said: “While insurance institutions need to take steps to minimise, if not avoid, the negative impact of externalities and ride on opportunities inherent in them, the regulator needs to ensure that customer protection and market stability receive, priority attention.

    “There is no doubt that the industry is going to continue to experience its share of the current economic challenges. The Commission recognises the need to be innovative  in its supervision of the institutions and would be so guided appropriately. It however, expects that the avenue provided by Insurers Committee will be fully exploited to progressively improve the Insurance Industry’s contribution to the real economy in the manner and scale expected by stakeholders.”

    Kari said that there is low patronage of insurance by government and its agencies and the lack of effort to protect public assets.

    “Even when it does, the funding is haphazard. It is common knowledge that the ability of government to replace damaged or lost asset is not as sound as it used to be as such insurance is the best alternative to no protection at all. Employees, especially our gallant forces fighting in security challenges need to have the comfort of insurance protection as they confront their duties. There is an apparent lack of insurance expertise in the civil service as such government is not guided properly internally as it ventures to deal with the industry. The position of insurance is virtually non-existent in the civil service’s scheme of service, for the few insurance professionals are not placed properly to play their professional role.

    “The industry has been yearning for a review of the Insurance laws in the country, to these end an insurance bill was drafted and submitted to the Ministry of Finance with the full involvement of all stakeholders. Almost five years later nothing has been heard of it. We strongly solicit the Minister to see to the process and enactment of this law to enable the industry play its rightful part in the developmental programmes of the government.

    The President of Nigerian Council of Registered Insurance Brokers, Mr. Kayode Okunoren, said the government’s efforts on ease of doing business was good for the industry.

    “We appreciate the initiative of the Federal Government in its efforts in creating an enabling environment for business operations in Nigeria. The Presidential Committee on Ease of Doing Business has the onerous task of dismantling all inhibitions against business initiation and growth in the country.

    “While the Committee is already engaging strategic stakeholders in working out the modalities, it is the belief of the Council that the insurance industry should be involved in the process in view of its pivotal place in business development.

    “As we are all aware, business growth must definitely come with risks which require professionals to handle and manage.

    ‘’Notwithstanding, the NCRIB will always seek ways to make contributions towards this loft initiative that is capable of ensuring a robust business growth and survival of our national economy,” he added.

  • NAICOM to release revised RBS guidelines

    NAICOM to release revised RBS guidelines

    The National Insurance Commission (NAICOM) may release a revised priority guidelines on Risk Based Supervision (RBS) for insurance operators this week.

    Commissioner for Insurance, Mohammed Kari made this known to reporters at the just-concluded African Insurance Organisation (AIO) Conference in Kampala, Uganda.

    Kari said the Commission had commenced migration of the insurance sector into the RBS regime when it introduced Enterprise Risk Management (ERM) and Code of Corporate Governance guidelines, among others.

    He said the Commission was set to conduct one of the principal programmes in the RBS regime which is the mandatory training for directors of insurance firms. According to him, the training is billed to commence this Thursday.

    He said: “We have since commenced migrating the sector into a RBS regime by the guideline we gave by the ERM and code of corporate governance. These are risk based. The only thing we have not come out with before is one of the principal programmes in the risk based, which is the mandatory directors’ training. This will hold on June 1 and 2.

    ‘’These are programmes for risk based and the training is to show that it has already started. Priorities guidelines have been reviewed and copies will be released to the operators on Monday (today).

    By the guidelines rolled out by NAICOM, the model will require the classification of assets of the insurance companies to ascertain their capabilities to underwrite various risk portfolios in the industry.

    Earlier, the commission launched the sensitisation to educate operators on the need for a switch from rule-based regime to risk-based supervision for insurance to play effective role in the economy.

    The Commissioner explained that consolidation does not mean just an additional capital, it may be redefined as the type of insurance business the companies want to operate.

    “Today, we have capital as the only basis for operation and if you meet the minimum capital, you can operate. For instance, underwriting any cover without consideration to the obligation to stakeholders and that is why we have infractions in the industry, explaining why we have many players in the industry that do not add value to the services they provide both in the intermediary and insurance sectors.’’

    “For companies to underwrite risk, they must have enough assets to cover the risks being underwritten. So, risk-based is being able to identify what is your financial capability. If your financial capability does not guarantee you to insure oil because of the huge capital layout involved in terms of obligations, you will not be allowed to insure the risks.”

  • Africa to increase insurance penetration, financial inclusion

    Insurance operators and regulators at the just-concluded General Assembly of the 44th African Insurance Organisation Conference, have passed a resolution to work on six common goals to advance the US$64 billion market.

    In the resolution, the stakeholders agreed to invest in partnerships that are wider, including non-insurance actors, and deepen within the industry areas that are critical to the agenda of increasing insurance penetration and realisation of financial inclusion.

    The resolution was read by Chief Executive Officer, Uganda Insurers Association, Ms Miriam Miriam Magala. Other resolutions at the conference include adoption of a range of technologies to collect data, design and deliver insurance products, provide educational information to the public, and manage the threats of cybercrimes.

    They also agreed to invest in capacity building across the entire industry including insurance companies, regulators, associations, and institutes; pursue the financial inclusion agenda through development of insurance value chains that cut across several stakeholders/actors within and outside the traditional insurance sector.

    Others are adoption of appropriate laws and regulation that allow for innovation and minimal compliance costs; and pursuit of a diversified strategy for consumer education that embraces the various strands of building capabilities of consumers to make the right decisions with full knowledge of the benefits and obligations and access.

    They also unanimously agreed that to reach the bottom of the income pyramid, products have to be delivered effectively and at an affordable price, which calls for leveraging capacities that exist within and outside the industry.

    They observed that as is the case with the industry, which enters into upward partnerships through re-insurance to deal with big risks, insurance actors have to do downward partnerships to better manage diversified small risks at the bottom of the income pyramid.

    The conference noted that increasing penetration of the smallholder farmers requires a lot of data to design and evaluate products, as well as make decisions regarding responses to emerging risk positing that technology will help to provide products and information as well as enable premium collections and claims payments.

    A specialised pool of knowledge for research, product development and regulatory reviews is required in a centralised place that serves the entire industry, such as , training institutes/associations.

    “We have resolved to work with government, regulators, insurance and re-insurance companies, local/regional/global associations and development agencies, such as the World Bank. He urged the Insurance Initiative, International Association of Insurance Supervisors (IAIS) to invest in developing the required capacities.

    In the case of agricultural insurance, the actors include farmers, agro-dealers, financial institutions, agents and insurers, among others. All the stakeholders  must be duly prepared for their roles as they are part of the chain in a world where “insurance is not bought but sold’’.

    “Regulation should be responsive to the African context, albeit within a framework that allows for appropriate harmonisation-based on best international practices, industry involvement and regional fora.

    ‘’Regulations should reflect local needs and conditions, while the strands should essentially address business and financial management, among others,  to reduce business risks.”

  • FBNInsurance Brokers appoints Ibidapo CEO

    FBNInsurance Brokers appoints Ibidapo CEO

    FBNInsurance Brokers, an FBNHoldings company, has  appointed Mr. Olumide Ibidapo as its new Managing Director and Chief Executive Officer.

    In a statement signed by the Head Corporate affairs of the FBN Insurance, Elizabeth Agugoh, Ibidapo started his career with IBN/Marsh Brokers in 1990 and rose through the ranks before joining FBNInsurance Brokers in 2006.

    Following FBNInsurance’s acquisition of Oasis Insurance, Ibidapo was appointed Head, Technical of the new company, FBN General Insurance.

    Under his management, the company established itself as a growing force in the general insurance terrain in Nigeria.

    Ibidapo holds a Bachelor in Sociology from the University of Ibadan and a Masters in Business Administration from Ladoke Akintola University of Technology, Ogbomosho.

    With over 25 years experience in Insurance and Risk Management, Ibidapo has established a reputation as a professional in commercial insurance programme structuring, special risks portfolio handling and claims management.

    Ibidapo is an Associate of the Chartered Insurance Institute of Nigeria (CIIN). He is widely travelled and happily married with children.

  • AIICO grows underwriting profit by 326%

    AIICO grows underwriting profit by 326%

    IICO Insurance Group underwriting profit increased by 326 percent from a loss of N5.5 billion in the 2015 financial year to a profit of N12.45 billion last year, despite facing severe macroeconomic headwinds in the period under review, the Chairman, Bukola Oluwadiya, has said.

    He made this known while addressing shareholders during the firm’s 47th Annual General Meeting  in Lagos.

    According to him, the growth was driven by slight underwriting improvements in the non-life business release of the reserves in the life business.

    He said high interest rates reduced the value of long-term insurance contract liabilities of the group, which is recorded as a release in their statement of profit and loss.

    He said as a result of their underwriting performance and increased investment income, after-tax profits increased by 756 per cent to N10.2 billion last year.

    He said: “The movement in long-term liabilities reserves is mirrored by the movements in asset values backing these liabilities. This essentially means that the reduction in reserves is offset by the reduction in asset values.

    The cumulative loss on fair value assets due to increased interest rates is reflected in the available for sale reserves, causing a 11 per cent reduction in shareholders’ funds.

    “This informed our decision to retain a significant portion of the profits and its plan to inject more capital into the business to fund its growth plan and also achieve a resilient balance sheet to withstand market risks.”

    Managing Director, AIICO Insurance Plc, Edwin Igbiti, explained that the company wrote gross premiums of N27.1 billion in 2016, down by N5.8billion from N32.9 billion the previous year.

    “This is largely because of our strategic decision to reduce premiums written in the long-term business like retirement product due to higher market risks, making gross premiums to reduce by N9.2 billion in 2016.

    “We also decided to turn down some unprofitable and low-return insurance premiums making our gross premiums to reduce by N600 million in 2016.

    “Actual investment income increased 27 per cent in 2016 to N7.2 billion from N5.7 billion. Our asset management capabilities continue to be a key strength for the company as we recorded a significant increase in investment income due to high yield,” he added.

  • Solvency 11 rules and ‘omnibus underwriter’

    The solvency 11 regime is an economic risk-based capital requirements model for insurance undertakings that became effective in the European Union (EU) in January, last year and is gradually being introduced in this clime, but yet to take effect.

    Unlike the one-model-fits-all capitalisation system vide Section 24 of the Insurance Act of 2003 CAP 117 LFN 2004 and NAICOM guideline in force, it allows an insurer flexibility in assessing Value-at-Risk (i.e., the gamut of risks faced by the insurer including insurance risks) or in calculating solvency requirements (SCR) based on: a standard EU minimum calculation formula for capital requirements (MCR); a set of governance and risk management guidelines; and supervisory controls. Thus when a company’s SCR falls towards or below the MCR, supervisory interventions are triggered. The ultimate goal is for the enhanced protection of the policyholder and stability of the (re) insurer’s business.

    Its emergence has further strengthened the resolve of ensuring that underwriters or insurable risks assessors (who decide what terms to accept insurable risks and whether or not to decline cover) do not bite more than they can chew. An integral part of the rule, the ORSA (own risk solvency assessment) requirement, referred to as the internal company model, gives insurers the latitude to regularly determine their risk appetite and corresponding capital requirements or SCR, based on specific risk profiles. For example, insurers can decide whether their expectations regarding investment returns on more volatile risks eg., oil and gas risks requiring higher capital is sufficient compensation for holding more capital; and in turn determine the extent of capital requirement.

    A remarkable difference between solvency 11 and the one-model-fits-all system is the absence of the calculated (SCR) and the standard (MCR) directives or a defined correlation between the technical provisions (risk reserves), investments, Value-at-Risk etc., in the case of the latter; which could be construed as over regulation of the current system, especially in a dynamic and challenging business environment.

    Solvency 11 ensures that the growth of the industry is not unnecessarily stifled by regulation. Insurers are also able to gain capital relief  from applying risk mitigation techniques via investments for which they can establish competence eg, reinsurance and derivatives, risk securitisation, etc. (unlike in the current system where capital requirement is fixed and not dependent on a company’s risk appetite, market risks and such like)

    From an investment standpoint, the existing system vide the insurance act of 2003, specifically lists the investment instruments that insurance companies can channel their funds. The authorised instruments are a mix of short and long term easily realisable investments. The guiding principle is to safeguard or protect policyholders from arbitrary investments by insurers.

    It is obvious from the Act that insurance investment is restricted to the 35 percent cap on life or non-life funds allowable for securities/property investments. This is further accentuated in a recession with the increased paucity of investible funds. Under solvency 11, investment is not restricted.

    That said, a cursory look into the financial statements of insurance companies reveals a trend and a craving for robust investment Incomes (more prevalent with life funds) rather than a quest for favorable underwriting results, or profits realisable from core insurance business activities. Underwriting appears to be taking the back stage in the seeming quest by the underwriter for pre-tax profit (further down the line) rather than underwriting profit.

    At the basic end of the spectrum, the underwriter herein referred to as the ‘basic underwriter’ is a ‘defender and manager’of the middle line parameters of (re)insurer’s financials; concerned with ensuring the adequate pricing of risks; that claims are brought to the barest minimum including reinsurance premium payouts, ensuring a balanced profile or portfolio of risks; however, an underwriting intern.

    At the professional end of the spectrum is the prudent underwriter or the ‘general manager and central defender’ of (re)insurer’s middle line financials; overly cautious and seen as the last line of defense; takes decisions based on historical data; not oblivious of the investment element already built into premium calculations, and thus more focused on core underwriting functions. A muted underwriting result is usually the endpoint.

    Hitherto, the desire was to seek a prudent underwriter but the forces of competition and the environmental dynamics have led to the emergence of another class of underwriter referred herein as the ‘investment underwriter’; a risk-preferrer; investment conscious; sees premiums, regardless of whether they have been appropriately priced or assessed, as investible funds to be channeled into calculated investment instruments with less regard for the inherent loss potential of adverse risks. In this case, underwriting profit may not be achievable; Pre-tax profit (further down the line) is the focus.

    Whereas the preferred underwriter (pre-solvency 11) is one who is able to align underwriting principles with underwriting profit, herein referred to as the ‘technical underwriter’ and albeit underwriting profit conscious, but unskilled in handling other organisational risks that could pose a threat to underwriting profit like market, credit and operational risks.

    From the standpoint of expediency, the scientific thread or the EU standard formula (with a 99.5 per cent confidence level) that binds the solvency 11 capitalisation models with insurer’s risk profiles, Values-at-Risk, Market risks, technical provisions, investment instruments and such like, and does not compromise the fundamental insurance practice of protecting the policyholder through affinity for underwriting rather than pre-tax profit, is highly desirable. Simply put, the correlation or interface of portfolio management with the realm of insurance underwriting (described above) will not only help to preserve the professional ethics of insurance business it would also ensure that underwriters do not lose focus in the quest to declare profits.

    Laws or rules are made for man but may not always be expedient. Consequently, the desired or sought after underwriter for the emerging regime here insofar referred to as the ‘omnibus underwriter’ is the one who is continously pushing the boundaries and looking for convergence points between what is expedient and what is lawful, for the benefit of all stakeholders both within his sphere of influence and the insurance industry at large; with the total balance sheet approach (ie the entire organisational risks) in view and profitability of his company as the goal.

    In conclusion, (re)insurers must begin to  build capacity in risk/portfolio management techniques and upgrade the diverse competencies of underwriters to an ‘omnibus underwriter’ status, and make them solvency 11 compliant; or face the challenge of certified risk management experts taking over the technical arm of (re)insurance business  with an attendant threat to underwriting.

    • Egbaran is MD/CEO, Mainstream Global Insurance Brokers