Chuks Udo Okonta
Over regulation and the haphazard manner at which regulators and agencies
of government, issue queries and sanctions on trivial matters, is giving
underwriters sleepless nights Inspen
has learnt.
The Chairman Risk
Management and ompliance Committee of the Nigerian Insurers Association (NIA) Aduloju
George, disclosed this in a report submitted to the association, adding that the
regulators often threaten underwriters with closure of their premises and court
actions.
He said underwriters
are also pressured in meeting the requirements of the Securities and Exchange
Commission (SEC), coupled with the delayed approval of their financial
statements by NAICOM.
The haphazard manner
at which regulators are issuing queries and slaming various sanctions on member
companies, even on trivial issues is also a great concern, he added
Survey by PwC, has identified regulation
as a top risk faced by insurers across Africa. The report stated that series of
new laws distracts Chief Executive Officers (CEOs) from focusing on strategic
areas of their business.
In the survey, PwC relayed 12
responses from insurance practitioners in South Africa and seven from the rest
of Africa. The professional services company polled more than 600 insurance
practitioners and industry observers in 54 countries.
The survey looks at what insurers see
as the top risks over the next two to three years.
Victor Muguto, long-term insurance
leader for PwC Africa, said the challenge was that a wave of new regulations
emerged at the same time. He said companies had indicated that the regulations
were costly to adhere to and also time-consuming.
Among the sophisticated regulations
that insurers have to deal with are those aimed at treating customers fairly,
scheduled for next year. Another is the solvency assessment and management rule
requiring long-term and short-term insurers to align their capital requirements
with the underlying risk so that they can pay out multiple claims from
policyholders.
The solvency assessment is scheduled
for 2016. There is also the National Health Insurance initiative which is being
piloted, the financial sector code, which came into effect earlier in the year,
and a raft of other regulations.
"It’s ironic that the industry’s
greatest risks are seen to come from regulation, which is intended to reduce
risk, at a time when operating and underwriting conditions are also very hard.
It is no surprise that these pressures are reflected in rising concerns about
the ability of management to handle them," Muguto said.
Tom Winterboer, the financial services
leader of PwC in Southern Africa and Africa, said on Thursday that in South
Africa some executives of key insurance companies spent about 65 per cent of
their time dealing with compliance issues.
"I think the insurance companies
fully subscribe to the fact that there must be regulation," Winterboer
said. However, he said insurers have to align their systems with new
requirements, and this usually comes at a cost.
Mark Claassen, an actuarial leader for
PwC in Southern Africa, said another challenge was duplication in the
regulatory environment, which consumed a lot of companies’ time.
Then there was regulatory uncertainty.
Firms were investing in systems but were unable to know whether a raft of new
regulations would push them to change these systems.
There are also fears that with the
pace of change and volume of new rules some of the small insurers may be unable
to cope with the costs.
Claassen said hundreds of millions of
rand were being spent by companies on aligning systems to regulations.
One of the biggest risks for the South
African insurance industry was the subdued macroeconomic environment. There was
also the challenge of attracting the right talent. This was cited as the
third-biggest concern.
While there was solid management in
South Africa, the survey said that the challenges included the shortage of
expertise such as actuarial skills.
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