INTERACTIVE
SESSION BETWEEN
GOVERNING
BOARD MEMBERS OF NAICOM
AND
INSURANCE INDUTRY OPERATORS
Venue: Eko
Hotel, Victoria Island, Lagos
Date:
March 11, 2014
Remarks by
Mr. Remi Olowude, OON
Chairman,
Nigerian Insurers Association (NIA)
The
Chairman of the Governing Board of NAICOM
Other
Members of the Board
The
Commissioner for Insurance
Deputy
Commissioners and Other Management Staff of NAICOM
President
of the Chartered Insurance Institute of Nigeria
Chairmen
of NCRIB and ILAN
Colleagues
in the Governing Council of NIA
Distinguished
Chief Executive Officers of the Insurance Industry
Ladies and
gentlemen
Let me
start by thanking the Chairman, Members of the Governing Board and Management
of the National Insurance Commission (NAICOM) for convening this very
significant meeting tonight. Also, on behalf of the Nigerian Insurers
Association (NIA) and the Chief Executive Officers of our member-companies, I
want to formally congratulate the new members of the Board on their appointment
and to wish you a highly rewarding tenure of office. A forum such as this is
crucial to the development of the insurance industry. This is because it
provides a strong platform for the operators and the regulator to review
processes and diagnose the challenges in the industry with a view to ensuring
sustainable growth and development of the sector.
I believe
that I will be speaking the mind of my colleagues here by restating the fact
that the NIA welcomes NAICOM's recent regulatory interventions and shares its
aspirations towards making the insurance industry more competitive and to
operate in line with global best practice. We note especially the Market
Development and Restructuring Initiatives (MDRI) of the Commission which was
designed to promote compulsory insurances. We also note the rejuvenated policy
of No Premium No Cover; the regulation on micro-insurance and the exposure
draft on market conduct guideline, which emphasises ethics and best practice.
Our members have actively embraced these reforms, including the rigorous
conversion to IFRS. I am confident that with constant regulator-industry
engagements as we are witnessing here today, the insurance industry will align
properly with various reform initiatives.
Mr.
Chairman, distinguished Members of the Board, opportunities and potentials
abound in the insurance industry, but there are also daunting challenges which
continue to stifle growth in the sector. Many of the retarding factors were
highlighted during the recent NIA Retreat in Lagos which the Commissioner for
Insurance graciously attended. These obstacles have been responsible for the
abysmally poor contribution of the insurance industry to the nation’s Gross
Domestic Product. The result is that insurance is therefore relegated to the
back seat in the scheme of national discourse.
This
perhaps explains why the industry is not deemed worthy of representation at the
upcoming National Conference. The situation is regrettable, to say the least,
and must not be allowed to happen. We believe that with the full support of the
Board, the unrelenting commitment of the Management of NAICOM and the concerted
efforts of all operators, the industry will experience a reversal of this
glaring omission. To make this happen, it is imperative that we dust up the
laws governing insurance business operations, many of which have become
obsolete and completely out of tune with the prevailing circumstances. It is
against this background that we want to appeal to NAICOM to always take
cognisance of this fact in the course of its regulatory duties, so that the
industry is not made to bear the brunt of inappropriate legislations. But I
must place on record our deep appreciation of the efforts of the Commissioner
for Insurance to reposition the industry for optimum performance. We wish to
admit that some aspects of the reforms that have generated debate from
different stakeholders are being discussed with the Commission. We, therefore,
use this opportunity to seek the understanding of the Board where required by
the Management of the Commission of the need to amend some aspects of the
reform programme.
I will not
bother you with details. The one thing to do in a dinner of their nature is to
discuss the most sensitive issues. We shall draw the commission’s attention to
issues that affect the stability and long term growth of the insurance
industry. This is in keeping with our collective sense of responsibility.
Our joint
aim this evening therefore, is to limit ourselves to some few issues that can
affect the sustainable growth of our industry and the Nigeria economy.
Permit me,
at this juncture, to restate some of the issues that bother our members, which
we would like the Board to take up with higher authorities, in the interest of
the industry and the economy in general.
The
encroachment on insurance business by government agencies, which try to provide
insurance protection to aviation passengers and public liability for nuclear
risks.
The
Federal Government in 2007 divested its interest in Insurance business when it
sold NICON and Nigeria Re, on the understanding that such concerns are better
managed by the private sector. But ironically, the same Government extracted
workmen’s compensation insurance business and transferred it to NSITF as
Employee Compensation Scheme.
In similar
vein, the Federal Government split pension business between insurance industry
and PFA’s, assigning the chunk of the business to Pencom and PFAs; while it
also moved health insurance from the insurance industry to NHIS. It is an open
secret that the NCAA, under the Ministry of Aviation, is planning to establish
insurance fund for aviation passengers’ liability. All over the world, aviation
passengers’ liability is subject to international conventions and the risks are
covered by conventional insurance policies; Nigeria cannot be an exception.
Similarly, the Nuclear Agency wants to establish fund for nuclear damage
insurance, instead of seeking conventional Insurance cover for the risks which
are covered in international insurance market.
Government
patronage of insurance services and the need for prompt payment of premium.
Government
and its agencies have been paying lip service to the importance and benefits of
insurance, without serious patronage and support. There is hardly sufficient
budget provision for payment of insurance premium by government and its
agencies. Therefore, when insurance services are patronized, payment of the
premium becomes an issue, a clear negation of the provisions of the law on “No
premium, No cover”. Some government parastatals or enterprises are funded
without allocation for insurance. Many insurance policies contracted by the
MDAs in the past were not renewed, thus leaving the assets exposed to risk,
damage and losses without insurance protection.
Restriction
on insurance investments and recognition of offshore investments.
There is
urgent need to review the current restriction on investment to ensure safe but
adequate returns to stakeholders for the viability of the industry. Investments
on equities suffered losses in 2008 and 2009, yet insurers are expected to
maintain the same proportionate level of investment in prescribed sectors.
There is
need to amend the provisions of Insurance Act 2003 and Regulation of insurance
company investments in line with the realities of business.
Mr.
Chairman Sir, NAICOM needs to review its position on off-shore investment for
the purpose of solvency calculation and actuarial valuation which we have
started discussing with the commissioner and his team.
Insurance
of oil and gas imports
There is need
to activate the various laws relating to Marine Insurance of refined petroleum
products imported into the country. The Insurance Act 2003, for instance,
provides that all imports into the country must be insured with an insurance
company registered in Nigeria. This law is only observed in the breach.
Consequently, we are seeking enforcement of the Cabotage Act 2003, review of
the Insurance Act 2003 and the Nigerian Oil Industry Content Development Act
2010.
Enforcement
of compulsory insurances.
We are all
aware that compliance with pension-related insurances and employee compensation
has become imperative for bidding for public sector contracts, including
insurance, but compulsory third party motor insurances are not considered as a
condition for any contracts. The essence of compulsory insurances is to ensure
that innocent victims of accidents and disasters are fully compensated, and to
minimize economic waste in the society. Compulsory insurances include: Motor
vehicle (third party) insurance; Insurance of all public buildings; Insurance
of buildings under construction; Insurance of all marine imports into the
country.
We have
also observed the gradual dominance of foreign investors in the Nigerian
insurance market. Although Direct Foreign Investment (DFI) is in the overall
interest of the economy, we want to believe that the foreign investors are not
placed at an advantage over their Nigerian counterparts. We welcome foreign
investors provided that there is a level playing field for all and sundry.
Other
critical issues that are of great concern to operators include:
Bailout of
insurance companies that lost substantial volume of their assets as a result of
financial meltdown and crash of stock market.
Many
institutions and enterprises all over the world benefited from bailout plans by
their Government after the economic crises and financial meltdown of 2008. In
Nigeria, the banking industry, aviation and manufacturing industries benefited
from the bailout by the Federal Government. Many insurance companies are still
groaning from the losses suffered as a result of the crash in the stock market.
Recovery has been difficult and returning to profit a herculean task. We appeal
to the Federal Government through your good offices Mr. Chairman to look towards
the direction of insurers in this regard.
Amendment
of Companies Income Tax (Amendment) Act 2007 with a view to correcting the
absurdities in the Provisions which made the statutes inimical to the growth
and development of insurance industry in the country.
Multiple
taxation of insurance companies by different tiers of government.
The need
for Federal Government to support the quest for accelerated insurance
penetration and density in Nigeria through micro insurance and takaful
insurance. To enhance the development of these forms of insurance, there is
need to enact laws that will guarantee government subsidy because the
insurances are for the benefit of the poor who cannot afford conventional
insurances. Without Government subsidy, agricultural insurance would be unable
to play its role in the development of farming.
Moreover,
micro insurance will play very important role in poverty alleviation programme
of the Federal Government by guaranteeing compensation to the poor who are
perennial victims of flood, fire and other natural disasters.
Contribution
of insurance professionals and experts into relevant government policy
decisions.
Appointment
of insurance professionals and experts into governing boards of companies,
parastatals and agencies where risk management considerations are relevant.
Return of
the statutory deposits made by insurance
companies to CBN
Co-operation
between the NIA and NAICOM’s Customer Complaints Bureau.
The
Chairman, distinguished ladies and gentlemen, this list may seem rather lengthy
but it is by no means exhaustive. We have decided to seize this occasion to
table these issues before the Board because, for the NIA, this gathering is of
great significance to the future of our industry. We count on you to use your
good offices, contacts and influence to lift the insurance industry to higher
heights and bring it to a pride of place where it rightfully belongs. Your
names will be written in gold.
In
conclusion, I will like to thank the Board and Management of NAICOM once again
for this opportunity. I am certain that the exchange of ideas between us will
deeply enrich and broaden our professional horizons. The NIA shall look more
inwards to take advantage of the untapped potential demand for insurance in
Nigeria, for this is a major step to engender the relevance of our business to
the growth of our nation. Towards achieving the Association’s goal of fostering
a healthier insurance industry in Nigeria, we shall continue to engage,
collaborate and cooperate with NAICOM, especially in the area of ensuring
compliance with all regulations.
I thank
you for your attention. Please enjoy the rest of the evening. God bless you.
REMI OLOWUDE, OON
Chairman
Nigerian
Insurers Association
March 11,
2014
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