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Tag: NAICOM

  • NAICOM,operators should grow long-term fund

    Government intervention in the review and strengthening of extant legislations on insurance, and better implementation and enforcement of Insurance Act 2003 and the National Insurance Commission (NAICM) Act 1997 by the regulator, are possible actions to ensure optimal operation of the Insurance Industry, the Managing Director, Infrastructure Bank Plc, Adekunle Abdulrazaq Oyinloye, has said.

    Oyinloye, who spoke as a special guest at the 2018 Insurance Brokers Conference & Exhibitions on the theme: “Insurance Industry: Survive, Thrive,” held in Lagos, called on NAICOM to enforce compulsory insurances to boost the industry’s long term funds, saying the industry has made only a marginal investment in the infrastructure sector in recent years.

    He said there is enormous opportunity for the industry in infrastructure development and finance in Nigeria, pointing out that government has a role to play in ensuring that the industry plays its role in economic development by making relevant laws that will help make certain insurance policies compulsory and harsh sanctions for non-compliance of same.

    Citing Section 64 of the Insurance Act that makes compulsory insurance of building under construction which is more than two floors, he said the general implementation of the Insurance Act has left more to be desired.

    Oyinloye said with the long-term nature of life insurance, retirement savings and pension annuities, the Industry is well positioned to participate in infrastructure financing of Private-Public Partnership (PPP) projects, given the need to match long-term liabilities with long-term assets.

    He urged the National Insurance Commission (NAICOM) and operators to play their role in contributing private investment and sector expertise in long-term PPP infrastructure project, adding that there are unique opportunities for the industry to play a pivotal role in contributing private investment and sector expertise in long-term PPP infrastructure projects.

    He said: “In today’s low-yield environment, insurers are under increasing pressure to source additional investment return. Infrastructure investments may present an opportunity for insurers to achieve the required yields to cover future liabilities and provide competitively priced products.

    “Infrastructure investments are an interesting option for an insurer’s portfolio, as they provide potentially lucrative risk-adjusted return on equity; Long-term risk exposure, which may provide a good match for long-term liabilities; illiquidity and sector-diversity, which could increase portfolio diversification and an opportunity to lend money to sectors in need of funding, leading to social and potentially reputational benefits.

    Oyinloye said the Industry has made only a marginal investment in the infrastructure sector in recent years. However, there is increasing interest as insurers find that the benefits of infrastructure assets outweigh the apparent costs relative to the low yields available on more traditional investments. Therefore, insurers should understand the requirements of the infrastructure market to suitably influence the availability and attractiveness of investments.

    In this regard, the Development Finance Institution, like the Infrastructure Bank PLC is the Industry’s partner, as it sits on identified selection of deals and pipeline opportunities which may be well suited to an insurance investor. We explore the operational complexity of such an investment, and analyze the materiality of such risks, including the possible mitigation options available to insurers.

    He stressed that insurance sector as a component of an efficient financial ecosystem.

    Giving the foregoing, he posited that the situation presents a compelling need for designing and implementing bespoke financing instruments suited to the long-term financing needs of infrastructure projects.

    He said for such instruments to be bankable, insurers would be required to develop matching products that align with the tenor, as well as the risk and returns profile of infrastructure investments.

    “This reality is particularly crucial if the nation is to harness the capacity of private capital to bridge the existing funding gaps in the infrastructure sectors.

    Undeniably, the role of insurance sector in back-stopping, de-risking and underwriting infrastructure financing instruments can thus be described as a new frontier that would bridge the misalignment between typical corporate/individual lending facilities and infrastructure project financing facilities.

  • NAICOM stays action on recapitalisation, reclassification

    The National Insurance Commission (NAICOM), said it has shelved plans on its  implementation of the Tier-Based Minimum Solvency Capital (TBMSC).

    NAICOM in a circular, directed insurance companies to continue to operate on subsisting regulatory framework prior to the issuance of the circular on TBMSC.

    The circular is coming after weeks of confusion among insurance operators on the next line of action of the regulator on the policy.

    The Federal High Court had on September 13 granted an injunction sought by some shareholders under the umbrella of Independent Shareholders Association of Nigeria (ISAN) against the implementation of the policy pending the determination of the suit.

    NAICOM stated in the circular tagged, Update on the Implementation of the Tier-Based Minimum Solvency Capital Policy for insurance Companies in Nigeria, issued and signed by Director, Authorization and Policy, NAICOM, Leonard Akah that the companies should maintain status quo in line with the court order.

    The circular read: “In compliance with the extant rules and the injunction issued by the Federal High Court regarding the TBMSC framework which was to take effect from October 1, 2018, the Commission wishes to clarify that the status quo will be maintained and that insurers are to continue to operate on subsisting regulatory framework prior to the circular.

    “Appropriate regulatory directive would be advised upon conclusion of the suit” it stated.

    The TBMSC was meant to reclassify the existing 57 insurance companies based on their 2017 financial

  • Court stops NAICOM from implementing new recapitalisation policy

    A Federal High Court in Lagos has stopped the National Insurance Commission (NAICOM) from implementing its Tier-Based Minimum Solvency Capital (TBMSC) policy.

    Justice Muslim Sule Hassan gave the order, restraining  the Commission until the expiration of 30-day pre-action notice.

    The suit  was filed by Sir Nnamdi Nwosu and seven others against the Commssion on September 6.

    Justice Hassan adjourned the hearing on the main action to October 8.

    Counsel to the plaintiffs are B. C. Igwilo (SAN) and Chuks Nwachuku.

    The TBMSC structure is a complementary measure to the ongoing implementation of the Risk-Based Supervision (RBS), programme. It is a three-level model which specifies capital requirement for each tier based on their respective risk classification.

    Tier-3 of the TBMSC stipulates that companies will operate on the existing minimum paid up capital of N2 billion for life, N3 billion for non-life and N5 billion for composite underwriters. Life companies will only be permitted to underwrite individual life policy, health insurance and miscellaneous insurances.

    Non-life companies will only underwrite fire, motor, engineering (only classes covered by compulsory insurance), general accident, agriculture and miscellaneous insurances.

    To operate in tier-2 of the TBMSC, companies must have 50 percent additional on the capital base. Life companies must have N3 billion capital base and will underwrite all tier-3 risks and group life assurance.

    Non-life companies must have N4.5 billion and will underwrite all tier-3 risks, as well as engineering (all inclusive), marine, bonds credit guarantee and suretyship insurances.

    For tier-1 players, companies must have 200 per cent additional on the capital base. While life companies must have N6 billion capital base and will underwrite all tier-2 risks and annuity, non-life companies must have N9 billion capital base and will underwrite all tier-2 risks, as well as oil & gas, (oil related projects, exploration & production) and aviation insurances.

    In essence any composite company that is life and non-life that wants to be in tier-1, must have N15 billion, tier-2 must have N7.5 billion while tier-3 must have N5 billion.

    Reacting to the court order, the Commissioner for Insurance, Mohammed Kari  said the Commission was yet to receive the restraining order as stated by the shareholders.

    Kari however said that the commission would not shy away from its responsibility of protecting policy holders and investors.

    He said the responsibility of the commission is not to punish operators, but to nourish them, adding that the regulator is poised to ensuring that the industry is insulated from future financial crisis.

  • Why NAICOM pushed for recapitalisation

    Complaints from operators in the oil and gas sector that some insurance firms find it difficult to pay claims compelled the regulator, the National Insurance Commission (NAICOM), to mandate them to recapitalise, it was learnt at the weekend.

    It was also learnt that the industry  could only insure 30 per cent of oil and gas business, a figure contested by other industry stakeholders who said the industry has only been able to underwrite five per cent of the business.

    The inability of some of the firms to pay claims made oil and gas operators, including multinationals, which before now take their insurance abroad, threaten to disregard the Local Content policy.

    The recapitalisation plan titled, “Tier-Based Minimum Solvency Capital” (TBMSC), the Commission said, is a complementary measure to the ongoing implementation of the Risk-Based Supervision (RBS) programme.

    NAICOM said one of the challenges facing the Commission is aligning achieving high-level penetration with operators and being able to live up to their responsibilities.

    NAICOM Supervision Director, Barineka Thompson, who spoke during a briefing in Lagos, said the Commission had to devise a means that is consistent with the market and environment of operators.

    He said even the operators agreed with the Commission at the insurers committee meeting in Abeokuta that the operating capital has to be tinkered with for the industry to optimise the potential of the insurance market.

    He said the inability of some insurers to honour their contractual commitments led to the introduction of the TBMSC structure.

    He said an improper capital structure could lead to the extinction of the insurance industry, adding that firms take too much risks with their capital, with more risks of increasing incidence of emergence of holding firms.

    Besides, insolvencies may become more common while public confidence in insurance erodes, and the industry declines, he added.

    He stressed that as the industry’s supervisor, its responsibility is to identify underlying trends; develop and apply appropriate tools that take into account the nature, scale and complexity of insurers, as well as non-core activities of insurance groups, to limit significant systemic risk.

  • Ovia urges NAICOM, NCC, CBN on financial inclusion

    To  acheive Financial Inclusion, the National Insurance Commission (NAICOM), Nigerian Communication Commission (NCC) and the  Central Bank of Nigeria (CBN) must approve the use of mobile phones to sell micro insurance to the poor and excluded adults in the country, Founder and Chairman, Zenith Bank, Jim Ovia  said yesterday.

    He spoke at Transcorp Hilton Hotel, Abuja,  during the 2018 Insurance Industry National Conference, entitled: “Insurance Industry and Financial Inclusion.”

    He said while NAICOM has released a new micro insurance guideline in this respect, this will not change if operators would still need to sell the product in the old traditional way.

    He said: “NAICOM has a new guideline on micro insurance but it is not being deployed through mobile telephony. The Commission can’t deploy micro insurance through the traditional old ways. It should be done through new means which is technology. The Commission, NCC and CBN need to approve mobile telephony for the distribution of micro insurance urgently,” he said.

    Meanwhile, NAICOM yesterday said it has concluded plans to launch the Nigerian Insurance Industry Development Plan (NIIDP) in order to boost financial inclusion.

    The commission said it had already concluded work on the NIIDP, with KPMG, a consulting firm monitoring its implementation to ensure each segment of the market kept to date with their assigned responsibilities.

  • NAICOM: 41.6m Nigerians excluded from financial services, insurance

    About 41.6million Nigerians are excluded from financial services, including insurance services, the National Insurance Commission (NAICOM) has said.

    The commission also said 40.1 million who live in the rural areas are excluded from any form of financial services.

    Commissioner for Insurance/Chief Executive Officer, NAICOM, Mohammed Kari, disclosed this at the ongoing Chief Executive Officers’ retreat of the Nigerian Corporation of Insurance Brokers (NCRIB) in Uyo, the Akwa-Ibom State capital.

    Mr. Kari, in a statement endorsed by NAICOM’s Head, Corporate Affairs Department, Mr Rasaaq Salami, in Abuja yesterday, said in the past five years, the Gross Written Premium of the industry hovered between N300billion and N320billion.

    He said: “The Nigerian adult population which consists of people from 18 years and above is 96.4 million, out of which 59.6 million are living in the rural areas. Among this rural populace, 40.1 million are excluded from any form of financial services. Additionally, the Nigerian formal sector provides income to only 7.9 million adults, representing 4.2 per cent, whereas 41.6 per cent are excluded from financial services, including insurance.

    “This offers a huge opportunity for “the future broker” to provide desirable services to close these existing gaps and enhance the general performance of the industry.

    “What this signifies is that the figures are not growing in the same proportion if the enormous potential at the disposal of the sector is to be used as benchmark.

    “A cursory overview on the access to financial services in Nigeria indicates that there is a huge deficit in terms of financial inclusion to which insurance is a veritable part. Statistical analysis indicates that Nigeria requires aggressive and strategic developmental efforts towards reaping the benefits of her abundant potentials.

    “This has become an imperative rather than an option if ordinary Nigerians who have no access to financial services must be brought to the fold.”

    He also said the commission had taken steps to create the legal framework and enabling environment for insurance business to thrive in Nigeria.

    “Having taken due cognizance of these indices, NAICOM over the years had taken steps to create the legal framework and enabling environment for insurance business to thrive in Nigeria.

    “The Commission had evolved several market development initiatives and platform to upscale insurance awareness and access, channels of distribution, product development to guarantee a stronger and viable insurance sector in Nigeria.

    “The Commission expects the industry operators particularly, brokers and underwriters to continuously take advantage of these initiatives to grow not just their respective business but the industry,” he added.

  • NAICOM refutes sanction on 14 firms over 2017 account

    The National Insurance Commission (NAICOM) has refuted a newspaper report (Not the Nation) that it has sanctioned 14 insurance firms for failing to submit their 2017 financial accounts.

    The Commission in a statement signed by its Deputy Director, Head, Corporate Affairs, ‘Rasaaq ‘Salami expressed shock at the display of ignorance and total lack of knowledge by the report.

    The statement read: “NAICOM has not sanctioned any insurance firm for failure to submit it’s 2017 accounts as claimed in the said news reports.

    “Please note that the deadline for submission of financial reports by the to the Commission in accordance with extant laws is June 30th. Thus, no insurance company could be said to be at default when the year is still in April.

    “The Commission, therefore, urges the Media to seek clarifications on issues they are ignorant of before publishing in order not to mislead the public.”

  • NIA to NAICOM: stop claims defaulters from new businesses

    To sanitise the insurance industry and rid it of underwriters who fail to pay genuine claims to insuring public, insurance companies’ umbrella body, Nigeria Insurers Association (NIA),  has called on the regulatory body, the National Insurance Commission (NAICOM) to stop the erring firms from doing new businesses.

    NIA Chairman, Eddie Efekoha, made the call at a press briefing to announce the association’s two-year plan to build a multi-million secretariat. The association has temporarily relocated to 264, Ikorodu Road, Obanikoro, Lagos in other to pull down the old secretariat.

    Efekoha, who is also Consolidated Insurance Plc (CHI) Managing Director,  said business owners and shareholders should take actions against companies that are not performing, stressing that it is not right for any underwriter to refuse to pay a genuine claim.

    He asked if a firm that is unable to pay claim should be partake in new businesses. He asked: “Who is to take the decision against such firm? Is it the NIA, the market or the regulator?”

    He argued that before a firm’s problem becomes compounded, somebody along the line has a duty to do something. He, however, noted that the Insurance Act has not been so friendly to the regulators and  has affected them in some areas where they needed to act.

    “The Insurance Act has not been so friendly to the regulators and has affected them in some areas where they need to act. Although the Act is undergoing some amendment, it has been a bit slow. We all know that the wheel of government grinds slowly, but it will surely grind. In the same vein, the problem we are having has nothing to do with the management of NAICOM but as a country.

    “I think that the issue of merger and acquisition cannot be decreed, but the regulator can say company A,  B and C, your capital is below minimum and if you don’t address it in maybe between one to  six months, we will take the next step. The first step is to say, you are not doing business anymore until you show evidence of resolving the problem. Then if it does not happen, you take further step. If you think it is the board that is contributing to it, you ask them to have a board change. If it is management, you ask them to change the management.

    “Although insurance company licences are not renewed on yearly basis, but they submit their account and reinsurances.There are rules for this business and when they are adhered to, there cannot be failure.

    “When a company raised N3 or N2 in 2007 and it is approved and reissued licence and that company today is having problems with its capital, among others, the question is what happened over the period. Did the regulator see their account and reinsurance? Were these reinsurances paid for? If they were paid for, why were the claims not paid? So if the direct underwriter fails, did reinsurance equally fail? So, it takes all hands to be on deck for us to resolve the problem. Management and owners of business must ensure that their companies are properly managed. It is not even the regulator because they don’t own the companies,” he explained.

     

  • No room for non-insurance operator, says NAICOM

    Some customers, who connive with insurance brokers, are endangering the insurance industry by allotting proportion of risk to local underwriters without due cognisance of the insurers’ capacity. They also place risk abroad when the local market is not saturated, commissioner for Insurance, National Insurance Commission (NAICOM, Mohammed Kari, has said.

    Kari, who spoke while addressing journalists in Lagos, said some insured, in alliance with intermediaries, chose to exclude some underwriters from participation in underwriting certain risks without cogent tenable justification. ““Some insured in alliance with intermediaries, chose to exclude some underwriters from participating in underwriting certain risks without cogent tenable justification

    “Once the consumer places his risks with the insurer, whether direct or through a broker, he or the broker has no role in the placement of the reinsurance,” he said.

    He warned the insured that the Nigerian Insurance space should only be occupied by Insurance institutions licensed and regulated by NAICOM. “We would not accept insurances placed through a non-licensed operator in this market,”he warned.

    He said the  practice is not in sync with the sector’s ethics and is detrimental and dangerous to the sector.

    The Commission, he said, frowns at the practice, warning that such consumers should desist from it as they run counter to the sector’s regulations.

    He said: “Where we have noticed such practices, we have rejected applications from operators for approval to cede such risks abroad. This action of the consumer and broker sometime leads to delays in placement of the risk even when the insured has paid its premium to the intermediary. While the Commission is not averse to ceding of risk offshore, it must be done only when the local market has taken the much its capacity would allow.

    “Other areas where the Commission has issues with the insurance consumers are delays in submitting evaluation results of bidding processes to the Commission, the emerging practice of supposed premium funding by local brokers on behalf of the insured and delays by the insured in issuing placement and renewal instruction to the insurer. These delays, more often than not, make it impossible for the insurer to meet the application period for the placement of excess risks offshore where applicable.

    “These are trends that are not only dangerous to the industry, but to the consumer. We ask you to desist from these practices because they are neither in their best interest nor that of the insurance operator and of course, that of our nation.”

    He craved the understanding and cooperation of consumers to ensure compliance with insurance laws and regulations, particularly the Insurance Act 2003 and the Local Content Act. “Such good understanding between all stakeholders can only make NAICOM more effective in its role of protecting the insurance consumer,”he said.

    Speaking on improving service delivery of insurance products and services in the Country to consumers, the Commissioner said the Commission has signaled the issue of effective and efficient service delivery to consumers as a key priority with its establishment of Complaint Bureau Unit to deal with complains from members of the public against any insurance operator.

    “This unit has recently been upgraded and is headed by a Deputy Director to attend to aggrieved consumers. Many aggrieved consumers have continued to access this desk to register their complains with us. We advise you to take advantage of this desk and report your challenges to us and I assure you that any company found in default shall be compelled to do the needful.

    “There is no doubt that our competitive environment and the changes in the world economy as a result of globalisation, deregulation, privatisation, financial meltdown, and the modern advancement in technology give insurers the opportunity to transform their business operations and realigned with customers by understanding consumers‘ needs  and ensure an enhanced and efficient delivery of products and services. “We are aware that the satisfaction of consumers of product and services plays a vital role in the sustenance of any business. The difference between great and poor customer service has always been clear, and businesses on the wrong end of this spectrum usually pay a price. This is as true for insurance as it is for any other customer-facing business.

    “Today, the consequences of subpar service are amplified by the speed and reach of social media. One poorly handled claim, one mistake captured on a smart phone could escalate quickly into a brand-damaging crisis. This is why we believe it has become imperative that insurance firms increased their focus on providing great customer experience,”he said.

  • NAICOM: insurance firms must consolidate

    NAICOM: insurance firms must consolidate

    There is an urgent need for insurance firms in the country to consolidate, the National Insurance Commission (NAICOM) has said.

    Commissioner for Insurance, Mohammed Kari who spoke while addressing insurance operators at the Nigerian Council of Registered Insurance Brokers (NCRIB) Members Evening in Lagos yesterday, said aside from the underwriters, all other insurance operators especially brokers would also need to consolidate.

    Kari said the resolution to consolidate was reached and agreed upon by the regulator and operators at the Insurers Retreat held in Abeokuta, Ogun State.

    He further advised operators who are seeking or may want to seek for a new operating licence to acquire some of the existing weak operators in the industry, adding that consolidation will enable the companies to get enough financial strength.

    Kari lamented that only between six and seven companies, out of 27, have paid dividend to their shareholders in the last three years.

    He said: “For those of you who are interested in the stock exchange, you know that they have removed the bottom. So, the retreat in Abeokuta came to the conclusion that there is need for consolidation. When the roadmap is concluded, we will come out with some directives and policies on how underwriting will be consolidated.

    “This is to enable the companies strengthen themselves financially or otherwise. If it becomes impossible financially, then we will do what is necessary. Not many companies have low reserve like one of them that continued to pay dividend. There can be no attraction to investors if you don’t pay dividend or if your trade is not marketable for trading. We found that out of 27 companies, only six or seven have paid dividend in the last 3 years.

    “There are no attractions to investors if you don’t pay dividend or if your trade is not marketable for trading. With the stop gap to share price removed, it means you have no cap price and you can go down to zero. We cannot allow or afford our market be exposed this way. So the insurance companies have seen sense in consolidation and I hope you brokers too will see sense in consolidation.”

    He stated that since 2008, only one insurance licence, aside Takaful and micro insurance, has been issued by the Commission.

    “The reason is not because we don’t want to see companies getting new license but we realised that after the last consolidation exercise, the so-called composite operation is a misnoma. By law, some claims were not cleared whether you can have general business, life business or composite business. We decided going forward that there can only be one or another but not composite.

    “The reasons are numerous and they are subject of another retreat.  But since we don’t issue new licence now, I will advise companies looking for fresh licence to look for somebody to acquire. The good thing is that the industry almost unanimously agreed that there is need for consolidation. At least, at the underwriter level, I wouldn’t mind consolidation at brokers level too but this is a free country and you can do what you like according to what the law provides. But we said in Abeokuta that if you don’t do it voluntarily, you will do it compulsorily.

    “We believe that there should be a consolidation of operations at all the insurance levels in Nigeria. At the underwriters level, we have companies that cannot pay salaries and claims,” he said.