High capital scares West African insurers from investing in Nigeria - WAMI

 

Chuks Udo Okonta

The comparatively high levels of capital requirements in Nigeria impose a considerable barrier to entering the insurance market for insurers from other West African Monetary Zone (WAMZ), Inspen has learnt.

The Director-General West African Monetary Institute (WAMI), Abwaku Englama, who disclosed this in Lagos, said the high capital requirement for obtaining insurance license in Nigeria, hinders cross border operations in the zone.

He stressed that whilst a life license requires $25,000 of capital in Sierra Leone, in Nigeria, same license requires a minimum capital of $13.5 million.

He said: “The Zone’s insurance laws and regulations are diverse. There are considerable differences in the amount of minimum capital required for obtaining an insurance license in each of the countries, the extremes being in Sierra Leone, where a life license requires $25,000 of capital, and Nigeria, where that same license requires a minimum capital of $13.5 million.

“Each of the WAMZ countries has its own set of insurance laws and regulations. The laws currently do not take risk based capital into consideration; the accent is on total capital. The comparatively high levels of capital requirements in Nigeria impose a considerable barrier to entering the insurance market for insurers from other WAMZ countries. Space for regulatory arbitrage in respect of capital requirements is invalidated by the fact that branch operations are not allowed in any of the WAMZ countries: separate corporate structures need to be established.”

He called on regulators in the zone to develop a formal platform to promote a common interest that would promote insurance practice.

“The level of staffing and the quality of the insurance regulatory staff is related to its funding.  A number of regulators do meet informally, and have done so over a period of time. There are no formal arrangements in place between the insurance regulators of the various WAMZ countries, for such purposes as information sharing.

“The only formal cross border agreement currently in place is the Brown Card Scheme under the ECOWAS framework. At the moment, companies operating in more than one WAMZ country have not yet established functions which are centralized across all countries, such as claims handling or underwriting,” he added.