NAICOM yet to receive application for stand-alone microinsurance licence

Commissioner for Insurance, Fola Daniel

• Grants five licences for microinsurance products to insurers

Chuks Udo Okonta

One year after the National Insurance Commission (NAICOM) released the guidelines for the operations of Microinsurance business it is yet to receive any application from the public for the licence to establish Microinsurance Company.

Inspen gathered from a liable source that the commission has so far received 15 applications for microinsurance products by existing insurance companies, of which only five had been granted.

Industry watchers believed the non-application for stand-alone microinsurance licence may not be unconnected to the high capital base required for such businesses.

NAICOM had said applicants can choice to underwrite Life Microassurance, General Microinsurance and Composite Microinsurance, adding that depending on the type of business applicants chose, the provisional minimum paid-up share capital requirements for each business are: Life Microinsurance business N150, 000,000, General Microinsurance business N200, 000,000 and Composite Microinsurance business N350, 000,000.

NAICOM said the licensing of specialised microinsurance company according to Section 2.1 of microinsurance guidelines must be a Limited Liability Company registered under the Companies and Allied Matters Act (CAMA1990).

Listing the requirements, It 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,” NAICOM added.

It 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, it said: “The CEO shall have a minimum of seven 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,” the commission said.

Observers believed the public having considered the list of requirements, have decided to shun the business, a development is they say it is inimical for the industry growth especially as the government and NAICOM have anticipated that insurance penetration would be deepen through microinsurance operations. 

Managing Director/Chief Executive Officer Riskguard-Africa (NIG) Limited, Yemi Soladoye, who was worried about the terms outlined by NAICOM, suggested the use of 5-tier operational model based on capital requirement to secure widest coverage of Microinsurance in Nigeria.

According to him, those operating on a National basis should have N350 million capital base; those on regional N90 million; those on state level N40 million; local government N10 million and unit N5 million.

He said the unit and regional approach will reduce cost of doing business lean structure, modest office, appropriate location must all be specified per unit of office outlet by the regulator. 

“Since the existing Insurance operators do not need any new capital requirement to operate Microinsurance, it is suggested that the Indian model of forced-familiarity and the China model of conditional expansion must be explored. 

“Any foreign player seeking entry into the Nigerian market must be given a mandate on the number and percentage of Microinsurance policies that must form its portfolio over a period of time. The same should apply to the existing underwriters,” he said.

Soladoye noted that the first set of microinsurance operators could be generated from the small-sized Insurance brokers, weak MFBs, and experienced Agents of the existing underwriters.  This approach, he said would make room for consolidation and appropriate learning time, putting in place the necessary strategies, goals and regulatory frameworks.