Shareholders decry over-regulation by NAICOM

President, Nigerian Shareholders’ Renaissance Association, (NSRA) Olufemi Timothy (middle) with other shareholders at the event.

Chuks Udo Okonta

Shareholders in the insurance industry have called on the National Insurance Commission (NAICOM) to execute its regulatory duties line with the protection of their investments.

The President, Nigerian Shareholders’ Renaissance Association, (NSRA) Olufemi Timothy, who disclosed this at the Annual General Meeting (AGM) of Royal Exchange in Lagos, said the regulator is gradually killing their companies through over-regulation. He noted that NAICOM’s mandate is to protect the interest and investments of shareholders, and not to stifle their investments by over-regulating their companies.

He urged NAICOM to realise that it is in existence because there are insurance companies, adding that the death of companies will mark the end of its operations.

Over regulation and the haphazard manner at which regulators and agencies of government, issue queries and sanctions on trivial matters, was also recently identified by some insurers as a challenge to their operations.

The Risk Management and Compliance Committee of the Nigerian Insurers Association (NIA) a report submitted to the association, said 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 slamming various sanctions on member companies, even on trivial issues is also a great concern, it added 

Survey by PwC, a South Africa based firm, has also 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.