KEYNOTE ADDRESS BY THE COMMISSIONER FOR INSURANCE/CHIEF EXECUTIVE, NATIONAL INSURANCE COMMISSION (NAICOM) ON THE OCCASION OF THE WEST AFRICAN INSURANCE COMPANIES ASSOCIATION (WAICA) EDUCATIONAL CONFERENCE IN LAGOS, ON NOVEMBER 25-26, 2013.
Protocols
I am delighted to have been invited by the WAICA Executive Committee, to address you at the opening ceremony of Year 2013 Educational Conference. This educational conference would not have come at any better time than now, shortly after the bold initiative promoted recently by the West African Monetary Institute (WAMI) and the WAICA, which is expected to take adequate measures towards the deepening and harmonisation of past efforts at integration of the insurance sector in West Africa.
Permit me therefore to convey my sincere appreciation to the Executive Committee of WAICA, for organising this year’s educational conference. The theme "An integrated and harmonised Insurance Industry in West Africa" could therefore not have come at a more auspicious time than now.
The theme of this conference supports the ECOWAS Vision 2020 and aligned with the strategy for supporting regional integration of the financial sector in West Africa which, rest on two pillars, namely
linking regional markets and,
(ii) building capacity for effective implementation of the regional integration agenda, with particular focus on the Insurance Industry.
Historically, let me recall that:-
16 West African countries signed the treaty for an Economic Community of West African States (Treaty of Lagos) on 28 May 1975;
The main purpose was to promote co-operation and development in all fields of economic activities in member states, initially couched in the context of a gradual progression from a free trade area via a customs union to a common market to promote trade flows via the establishment of a multilateral payment system arrangement.
A revised treaty of 1993 (initiated in 1991) recognized other challenges and extended the common market program to incorporate adoption of common policies beyond economic, to include socio-political and cultural policies and a definitive statement on the creation of a monetary union with effective integration and harmonization.
The ECOWAS Programme was expected to create the necessary conditions for the establishment of a monetary union and to provide an effective architecture for the creation of a common economic space.
The main economic policy objectives of ECOWAS are:
to enhance intra-regional trade;
reduce transaction costs;
eliminate exchange rate risk;
boost factor mobility; and
enhance investment and growth and reduce poverty
Achieving an integrated and harmonized insurance industry in West Africa could refer to efforts to broaden and deepen insurance financial links within the sub-region, whether through market-driven or institutionalised processes. Integration requires the elimination of barriers to cross-border investments and differential treatment of foreign investors within the region. It also extend to harmonising legislations, policies and institutions, which over time can lead to national financial markets effectively functioning as one.
The West African financial markets are small and fragmented, and consolidating markets through integration and harmonisation could yield several benefits:
Bring together scarce savings, viable investment projects and financial infrastructure;
Increase the numbers and types of financial institutions and instruments;
Increase competition and innovation;
Increase underwriting capacity of insurance companies in the sub-region;
Enhance reinsurance capacity and thereby reduce capital flight;
Reduce inefficiencies in lending given a wider pool of bankable projects; and
Expand opportunities for risk diversification.
In addition, integration and harmonisation of the insurance industry in West Africa could help improve regulatory and supervisory bodies, insulate insurance institutions from domestic excesses, harmonise regional laws and institutions, and create additional opportunities for learning by doing.
To achieve an integrated and harmonised insurance industry in West Africa, a number of issues pose some challenges, but there are also huge opportunities. The key challenges include: inadequate and poor regional infrastructure network, weak institutions and human capacity, and insecurity and political instability. Other challenges are diversity across the economies and divergent country attitudes towards regional integration.
The availability of abundant natural resources and a growing population of the middle and upper class of the society, offers opportunities for insurance business. Likewise, the political commitment at the highest government level also holds the prospect for heightened infrastructure development and trade expansion efforts in the sub-region. Furthermore, enabling the flow of capital, management know-how and technologies within the sub-region, and between the sub-region and the rest of the continent is a priority outcome of the sub-regional integration process. In this respect, the pattern of intra-regional investment, led by Nigerian private insurance companies operating across the sub-regional and East African market, of the emerging footprint of pan-African financial institutions and increasing presence and interest of investors particularly from other African countries in the Nigerian Insurance Industry are a positive development, which should be further encouraged.
Suffice it to say that Insurance remains the key driver in the economies of countries, and the industry has remain a 3rd-level player in the financial services sector of West African States. While the other components of the financial services sector in the sub-region have all moved on and firmed up processes for their integration and harmonisation, it is regrettable that same cannot be said about the insurance sector. Similar efforts to integrate both the banking and stock market sectors in the sub-region were successful and it is expected that WAICA and the WAMI, will drive this course in the insurance sector.
Integration and harmonization achieved in the banking and capital market sectors did not however come without challenges. Some of the challenges facing the regional insurance market include low level of financial literacy, lack of adequate awareness of insurance mechanism and poor perception of the industry. In terms of harmonization, some of the areas of challenge that must be addressed during this education conference include regulation, supervision and enforcement, market conduct, self-regulation and pricing among others.
I will expect that participants at this conference will kick-start the process of integrating the WAMZ insurance sector particularly, development a roadmap to drive integration in the insurance sector in the zone and streamlining insurance integration efforts in the sub-region. They are also expected to propose the constitution of a council to drive the integration of insurance in the sub-region and propose the establishment of a technical committee to serve as an advisory body to the council on insurance integration in the zone.
In conclusion, it is therefore expected that the insurance industry in the West African sub-region would leverage and key into this opportunity by developing the needed products and services as well as build underwriting capacity that will accommodate big risks, and halt the capital flight currently being experienced, particularly in the oil and gas business. This will no doubt support, protect and assist the attainment of the goals of WAMZ.
Therefore, the need for integration and harmonisation of the insurance industry in the WAICA member states is no longer an option but an imperative.
Thank you for listening.
Fola Daniel
Commissioner for Insurance
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