Tag: NAICOM

The National Insurance Commission (NAICOM) has officially issued an operational license to NPF Insurance Co. Ltd, allowing the company to commence general insurance operations in Nigeria.

The license was presented by the Commissioner for Insurance, Mr. Olusegun Ayo Omosehin, at a brief ceremony in Abuja, recently.

This milestone follows months of deliberations and public debate over the establishment of a police-affiliated insurance company.

NAICOM confirmed that NPF Insurance met all registration requirements before being granted approval to operate.

The approval process for NPF Insurance was not without its challenges. In August 2024, NAICOM acknowledged the objections raised by various stakeholders against the establishment of the company.

The Commissioner for Insurance, Mr. Omosehin, stated at the time that the commission would thoroughly review these concerns before taking a position.

“We are open to licensing new firms, but those interested must meet the requirements,” Omosehin reiterated during the licensing process.

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One of the prominent objections came from former Commissioner for Insurance, Mohammed Kari.

In a letter dated July 25, 2024, Kari addressed his concerns to Omosehin, copying key government officials and industry leaders, including the Minister of Finance, the Chairman of NAICOM, and the leadership of relevant Senate and House Committees.

Despite the controversies, NAICOM proceeded with granting the license, signaling confidence in NPF Insurance’s capacity to meet regulatory standards. The company is now set to offer general insurance services to Nigerians, with a focus likely to include policies tailored to the needs of law enforcement personnel and the wider public.

The granting of this license shows NAICOM’s commitment to expanding Nigeria’s insurance industry by accommodating new entrants that meet stipulated requirements.

The entry of NPF Insurance into the market adds a new dimension to Nigeria’s insurance landscape. While some stakeholders remain skeptical about a police-affiliated insurance company, others view it as an opportunity to enhance the welfare of police officers and foster competition within the industry.

As NPF Insurance begins its operations, its ability to address public concerns and operate transparently will be critical to gaining trust and achieving long-term success in the competitive Nigerian insurance market.

The insurance market recorded about N813.1billion in Gross Premium Written in Quarter 2, 2024, indicating a 47.4 per cent growth rate compared to the same period of the previous year and a 72.7 per cent, quarter on quarter, it was gathered yesterday.

According to the National Insurance Commission (NAICOM), the steady growth from Q1 of the year correlates with the current performance of the period under review, as contained in the commission’s Bulletin entitled: “Synopsis of the Insurance Market, Second Quarter, 2024”.

The performance analysis of the Nigerian Insurance Industry is an insight into the market behavior in the second quarter of 2024.

The performance analysis of Gross Premium Written during the quarter under review shows that the market achieved a gross premium written of N813.1billion, a notable performance amid macroeconomic challenges in the country.

The report further showed an update on claims component, stating that consistent regulatory focus on public awareness and the enforcement of timely claims settlements has had a significant impact on the insurance industry, signifying persistent increase in gross claims reported, stood at N297.9 billion in Q2 2024.

This represents 36.6 per cent of all premiums generated during the period and, a 15 percent increase on annual basis.

The net claims paid on the other hand stood at N259.4 billion, signifying an 87.1 per cent of all gross claims reported in the industry during the period.

On one hand, the life insurance business of the industry recorded a near perfect point of 92.5 per cent claims settlement against reported claims while net claims paid of the non-life segment stood at about 83 per cent of gross claims reported.

The percentage claims settlement was a direct replication of Q1 2024 array, in all classes, the ratio of net claims paid stood above average position against the figures.

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Motor Insurance business reported an exceptional ratio of 95.3 per cent of net claims paid against gross claims while Marine & Aviation businesses followed at about 95.0 per cent, higher than in the previous corresponding period of 74.5 per cent of the preceding year.

The General Accident of 85.9 per cent and Fire 67.7 per cent stood at a relative stability compared to the preceding period.

The performance in the Oil and Gas in terms of claims settlement was rather commendable as it recorded an improved ratio of net claims paid to total reported claims of about ninety-three per cent during the period.

This is despite recording a low retention ratio during the same period at just about thirty-two per cent.

On profitability of the sector, the report stated that the market indeed remained profitable during the period under review, recording an overall industry average net loss ratio of about 55.5 per cent, higher than 52.9 per cent reported in the previous corresponding period.

It read: “The Non-Life segment’s net loss ratio stood at 57.2 per cent while Life business recorded an improved net loss ratio of 53.6 per cent during the same period. The net loss ratio of the overall market average has improved by three points compared to the corresponding prior period. It is remarkable that the market has sustained some good profitability standing during the review period.

“However, it is important to note that the ratios mentioned reflect the market averages while there are few other underwriters whose loss ratios were rather recorded at a level not so impressive, over a hundred per cent or higher during the same period. This indicates that while some players in the market are experiencing significant challenges, the broader industry still maintains a favourable profitability profile.”

Also on market concentration risk, the report showed that a relatively uneven distribution of market share is recorded more in the Life segment of the industry compared to the Non-Life section during the review period.

During the quarter under review, the top three Life insurance companies accounted for about 43.8 per cent of the total Life premiums, while the top three companies in the Non-Life segment held approximately just about 34.8 per cent.

Furthermore, 86.6 per cent of all Life business was concentrated among the top ten players, with the bottom ten players contributing just 1.3 per cent of the Life insurance premiums.

On the other hand, in the Non-Life section, the top ten underwriters generated around 66.3 per cent of the gross written premium, while the least ten Insurers controlled only 1.1 per cent of the market share during the same period.

Meanwhile, the industry reported a total asset of N3.68trillion, signifying a 9.5 per cent increase from the N3.33 trillion reported in Q1 2024.

The balance sheet indicates that the Non-Life business holds assets amounting to N2.29 trillion, while the Life business accounted for N1.39trillion of the industry total assets. These figures highlight a significant increase in both segments, reflecting the overall robustness and upward trajectory of the industry.

Overall, the report stated that the industry has indeed demonstrated resilience, good soundness, profitability, and stability in view of the market behaviour during the period of the second quarter.

This is supported by the key indicators of premium generation, claims experience and a significant asset expansion which is suggestive of effective risk management, prudent underwriting practices and, certainly, an effective regulatory environment prevalent in the industry. Thus, the market remained not only profitable in the current but signifying a positive outlook, definitely, the report noted.

• Warns against delays

The National Insurance Commission (NAICOM) has issued a directive to all insurance companies to significantly reduce outstanding claims before the end of the year.

This mandate was delivered by the Commissioner for Insurance and Chief Executive Officer of NAICOM, Olusegun Ayo Omosehin, during the 2024 Insurance Directors’ Conference held in Lagos on Wednesday.

The Commissioner noted that the era of unnecessary delays in settling legitimate claims is over, warning that insurers who fail to meet their obligations will face severe regulatory actions.

“As a Commission, we are committed to strictly enforcing the law and taking swift action against any insurer failing to meet their claim obligations. Simply put, if a company cannot honor legitimate claims, it has no place in our industry,” Omosehin declared.

He stressed the need for insurers to prioritize financial stability and adhere to prudential regulations. He called on institutions to prepare for the impending Risk-Based Capital regime, noting that adequate capitalization is essential for market competitiveness and resilience.

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“We must prioritize robust capitalization to effectively tap into target markets and navigate current industry realities,” he said.

The Commissioner also noted that NAICOM had conducted preliminary Risk-Based Supervision examinations of several insurers over the past year and a half. While the exercise is ongoing, Omosehin urged company boards to address compliance issues raised during the process and demonstrate a firm commitment to Governance, Risk, and Compliance (GRC) principles.

He added that adherence to GRC principles would enhance decision-making, increase transparency, and improve regulatory compliance, ultimately strengthening the insurance sector’s capacity to meet its obligations.

NAICOM reaffirmed its commitment to aligning the insurance sector with President Bola Tinubu’s vision of growing Nigeria’s economy to $1 trillion by 2030. Omosehin acknowledged that the sector must contribute meaningfully to de-risking the economy, stating that “de-risking a trillion-dollar economy takes more than mere rhetoric.”

To support this ambition, NAICOM plans to collaborate with the National Assembly on the successful passage of the 2024 Insurance Reform Bill, which will provide the legal and regulatory framework needed for the sector’s transformation.

As part of its agenda, NAICOM outlined five key priorities to enhance the industry’s contribution to economic growth: safeguard policyholders and restore confidence in the insurance industry; strengthen supervisory capabilities; Improve the financial stability of institutions; foster innovation and ensure the sustainability of the insurance industry; Enhance insurance accessibility and penetration across Nigeria.

The Commissioner reiterated NAICOM’s dedication to implementing these strategies to position the insurance industry as a critical driver of economic growth and ensure it plays a pivotal role in achieving Nigeria’s long-term development goals.

The Islamic financing in the country has grown to about three per cent of the country’s total financial market with an estimated value of $3.8 billion.

Commissioner for Insurance, Mr. Olusegun Ayo Omosehin, who spoke at the second edition of the African Takaful and Non-Interest (Islamic) Finance Conference, said the expansion reflected a robust and rising demand for Shariah-compliant financial services.

Mr. Omosehin said Sukuk bonds account for 59.3 per cent of the market share, non-interest banks 39.8 per cent, and Islamic funds and Takaful insurance 0.9 per cent.

The industry is made up of four non-interest banks, five Takaful companies, 15 microfinance institutions, and 10 non-bank financial institutions.

In collaboration with other regulators, the National Insurance Commission (NAICOM) Omosehin said is committed to supporting the sector’s growth by fostering more Shariah-compliant investment options for Takaful and other non-interest financial institutions.

Mr. Omosehin noted Takaful’s unique position in Islamic finance, explaining that it is a form of insurance grounded in mutual cooperation and shared responsibility, distinguishing it from conventional insurance models that typically involve risk transfer and interest.

“Takaful enables individuals to contribute to a shared fund that assists members in need, reinforcing community solidarity. This approach offers an alternative that aligns with the ethical principles of Islamic finance,” he said.

Since the release of Takaful Operational Guidelines in 2013, NAICOM has licensed five Takaful operators, a sector which now represents around 1-2 percent of Nigeria’s insurance market.

The future of Takaful he said looks promising, with an average annual growth rate of over 34 percent in contributions over the past four years.

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Omosehin added that the Commission is supporting this growth through various initiatives, including the adoption of a risk-based capital system that lowers capital requirements for Takaful operators and facilitates market entry for new players.

NAICOM has also implemented the Market Conduct and Enterprise Risk Management Guidelines for Takaful and Retakaful operators, ensuring best practices and effective risk management within the industry. Furthermore, NAICOM has conducted public sensitization workshops to raise awareness about Takaful and its benefits.

The Commission collaborates with international standard-setting bodies, including the Islamic Financial Services Board and the Accounting and Auditing Organization for Islamic Financial Institutions, to provide regulatory guidelines, technical training, and support to the industry.

Through the principles of risk mitigation, social justice, and sustainable development, Islamic finance and Takaful contribute to resilience, inclusivity, and the pursuit of long-term, ethical growth.