NAICOM lists conditions for establishment of Microinsurance firms

From left: Director Research Strategy and Information Technology National Insurance Commission (NAICOM), Adamu Balanti; Deputy Commissioner Finance and Administration, George Onekhena and Mrs Ezeoma Ikebe of Nigerian Council of Registered Insurance Brokers (NCRIB) at the event in Lagos.

Chuks Udo Okonta

The National Insurance Commission (NAICOM), today Thursday, unveiled the proposed requirements for the establishment of microinsurance firms in the country.

Its, Head of Compliance Sabiu  Abubakar, in a paper entitled: Registration Requirements for Microinsurance Operatoration in Nigeria, presented at A-2 Day Takaful and Microinsurance Stakeholders Workshop in Lagos, said anybody seeking to float a microinsurance firm must obtain application form from the Commission which shall be completed and submitted to the Commission along with the following: A non-refundable registration fee which is yet to be decided and a certification fee also to be decided.

He said service providers groups can only play a role in insurance market, when they are licensed or authorized by the commission. Stressing that the authorization, provides Service Level Agreement (SLA), to enable an operator distribute or sale Microinsurance products to low income earners.

He noted that insurance companies will obtain the approval of SLA from NAICOM to enable them play their role, adding that approval of service level agreement, also has to be obtained by an insurer where the insurer wants the service provider to provide additional service to him such as premium collection from low income earners, premium remittance to the Insurer, collection of underwriting information from low income earners to Insurer, clients data update, claims notifications and  remittance of claim amount to Insurer and more.

              He said insurance broker and agent are exempted from going into SLA agreement with an insurer for transaction of microinsurance, because they are already registered by NAICOM

He said service level agreement is a documented undertaking, signed and sealed between Service Provider and Insurance Company or microinsurance Company containing terms and conditions of a partnership contract to deliver insurance or provide certain insurance services by the Service Provider for the insurer.

 He maintained that a microinsurer shall prior to appointing a service provider execute a Service Level Agreement which shall contain the following minimum standards:

Right and obligation of either parties, premium collection notification clause, claim administration and settlement clause, commission payment and or other deduction, record management and any other requirements as the Commission may from time to time prescribed.

 

“Licensing of specialized microinsurance company Section 2.1 of microinsurance guidelines must be a Limited Liability Company registered under the Companies and Allied Matters Act (CAMA1990). The applicant shall choice to underwrite the following businesses: Life Microassurance, General Microinsurance and Composite Microinsurance.

 

“Depending on the type business the applicant has chosen, the following are provisional minimum paid-up share capital requirements for each business: Life Microinsurance business N150, 000,000, General Microinsurance business N200, 000,000 and Composite Microinsurance business N350, 000,000, “he said.

 He said certificate of incorporation in the Company’s name from CAC, particulars of directors (form C07), particulars of share holders (form C02), registered address ( form C06), memorandum and Article of Association (MEMART) and evidence  of payment of minimum deposit with  the Central Bank of Nigeria ( i.e. 50 per cent of paid up share capital) should also be submitted by the applicant.   

“Applicant shall submit its business plan and feasibility study of Microinsurance to be transacted within the next 5 years and it shall contain: Introduction/background of the Company- Brief background about the organization, including past experience of the sponsors/promoters, CVs of the proposed directors and Management who are anticipated to carry on the proposed Microinsurance insurance business in Nigeria, along with its pattern of shareholding.

“Vision Statement – should define the purpose of the organisation, mission Statement – The mission statement should guide the actions of the organisation, spell out its overall goal, provide a path, and guide decision‐making.

“Targeted Low Income earners Market and Service providers, targeted volume of business, in case of Life microinsurance a signed statement of actuary on premium rates and benefits, terms and condition of proposed products to be offered.

 “Nature and basis of Premium Rating and Procedures, in case of Life business, method of distributing profits between policyholders and shareholders, organisational Structure of the Company, initial Estimated Set up cost of the company and use of IT and its relevance to the business.

“Propose Products to be sold which most reflect microinsurance nature, a specimen copy of Proposal forms, policy document, Cover notes, Certificate, and Claim forms to be submitted to NAICOM. Evidence of adequate and valid reinsurance treaty, in case of Life business, table of premium rates and their basis – -Promotion & Publicity ( Advertisement), submission of operational manuals on underwriting, claims,        reinsurance, commission, investment, accounting, MIS reporting and more,” he added.

 He listed other requirements as evidence that the directors have attended the promoter’s interview and are adjudged suitable and are not disqualified by the provision of Insurance Act 2003, details Employment career history of the proposed CEO, senior management team and Secretary of the Company, copy of the CEO’s appointment letter and his acceptance letter, evidence of resignation or formal disengagement of the proposed CEO from his previous employment and acceptance of his resignation by previous employer and a declaration by the CEO and a director who signed the application form that the business shall be transacted in accordance with sound Microinsurance principles.

On the proposed list of executive directors and their comprehensive resumes, he said: “The CEO shall have a minimum of 7 years post qualification working experience as associate member of CIIN or its equivalent, for non-associate member of CIIN, a minimum of 10 years working experience in the Technical Department of Insurance Institution is sufficient, Head of Technical Department shall have a five years post qualification as associate member of CIIN otherwise seven years working experience in Technical Department of an Insurance Institution is sufficient, details of individual or group of related individual having substantial share holding in the company and a declaration signed by at least two Directors that the business shall be transacted in accordance with sound Microinsurance insurance principles.

“A sworn affidavit by each Director, manager and secretary that he/she is not disqualified under the provisions of section 12(1) of the insurance Act 2003 from being a director, Chief Executive, Manager or Secretary (details to be stated in the affidavit) together with a recent passport photograph of the Directors, Chief Executive, Managers and secretary.

“Completed Personal History Statement (PHS) form containing names, addresses and employment history including directorship of other companies of the chief executive and all other directors of the company for the past 10 years.

“Names, qualifications, experience and addresses of each of the proposed heads of departments and Executive Directors. Evidencing expertise must be provided including formal practical training in Microinsurance Business and other related business.

 “All these information are to be reviewed by NAICOM and if applicant is found suitable a license is given to the company to operate as a specialised microinsurance company to underwrite microinsurance businesses only,” he said.

Deputy Commissioner Finance and Administration NAICOM, George Onekhena, said the commission is committed to providing enabling environment for insurance to thrive, adding that operators should cooperate with the commission to achieve set objectives.