Insurance Bill 2020: NIA opts for risk-based capital

By Omobola, Tolu-Kusimo

The Nigerian Insurers Association (NIA) has recommended the introduction of Risk-Based Capital in the Consolidated Insurance Bill.

The insurers believe it is the right capital model to align the market with international best practice and reposition it for  growth and development.

Making a presentation at the two-day Public Hearing on Consolidated Insurance Bill 2020 organised by the House of Representatives Committee on Insurance and Actuarial matters in Abuja, Chairman of the association Mr. Ganiyu Musa stated that in adopting Risk-Based Capital adequacy template, the association took cognizance of the need to consider insurance risk, market risk, credit risk, and operational risk as well as the need to apply such capital charges on assets and liabilities, all capital resources inclusive.

He hinged the association’s position on the 2013 International Monetary Fund (IMF) Report on the Nigerian Insurance Industry, which prescribed the risk-based capital model as most suitable for the  market.

He said: “The IMF report was duly acknowledged and admitted by the National Insurance Commission (NAICOM) as the right capital framework for the market as it seeks to limit the capital required by operators to the level of risks they can carry.

“When the Bill is eventually signed into law in line with this proposal, it will lay to rest, the contentious issue of the definition of capital which has been a major point of the association’s engagements with the commission during the ongoing recapitalisation.

“We are convinced that risk-based capital adequacy template is the best fit for the insurance industry in Nigeria, especially given that the 2013 IMF Report has prescribed it and the commission agreed with it. This will also align the definition of insurance with the various positions such as IAIS recommendations which include ICP 17 on Capital Adequacy; European Union Directives On Minimum Capital Requirement; OSSFI (Canada); APRA (Australia Prudential Regulatory Authority); SAM (Solvency Assessment Management) South Africa; Kenyan Model; and Malaysian Model.

NIA’s Director-General, Mrs. Yetunde Ilori emphasised that risk-based capital is the direction to go if the industry is to attract the right investment and increase insurance contribution to the Gross Domestic Product (GDP).

She expressed the hope  that the insurance companies are searching for funds to capitalise their operations, adopting this definition will make the insurance industry in Nigeria attractive to investors and save about N77billion payout as cost of recapitalising.

The 2020 Consolidated Insurance Bill is expected to address some of the gaps in the 2003 Insurance Act and reposition the industry for better results, she added.