Global Financial Institutions, Agencies Rate Insurance Sector As Under-Regulated

Daniel

By Joshua NSE

The complaints of over-regulation, regime of punitive fines and penalties by operators of the insurance industry in Nigeria may not have been substantiated.

Specifically, the International Association of Insurance Supervisors (IAIS), the Financial Stability Board (FSB), the International Monetary Fund (IMF), KPMG and Standard & Poors, have endorsed rating report that the Nigerian insurance industry has been under-regulated.

The Commissioner for Insurance and Chief Executive, National Insurance Commission (NAICOM), Fola Daniel, speaking at the investiture of the Nigerian Insurers Association (NIA) Chairman in Lagos, told the Council members of the association " Some of your members complain of over-regulation saying the regime of fines and penalties has become punitive. This is most unfortunate. You have made this avoidable scenario look more important than driving growth and value.

"So far, your members are yet to demonstrate how regulation stifled the performance of insurance companies. It is pertinent to note that every report from international organisations and rating agencies have continued to rate the Nigerian insurance industry as being under-regulated.

The NAICOM boss apparently endorsing the rating report said we cannot but honestly agree with the submission of the agencies and henceforth there will be zero tolerance for solvency gaps in the insurance industry.

He told the association "From the audited financials of nearly a dozen insurance companies, solvency gaps are recurring features of their activities for as much as three consecutive years. Appropriate regulation should have resulted in either suspension of the operating license and possibly withdrawal. The Commission had chosen to show some understanding against the backdrop of massive investment losses following the capital market crash of 2009/2010. Whereas other sectors have achieved reasonable recovery, insurers and NAICOM may no longer be able to invoke the excuses of the market crash as justification for the poor turn of event. The Commission shall therefore have zero tolerance for solvency gaps in the ensuing year in the interest of the insuring public and for the avoidance of exposure of NAICOM to regulatory risk".

On late submission of audited report, Daniel said, "Whereas the Insurance Act 2003 provides for submission of annual accounts no later than 30th June, the requirement by the Nigerian Stock Exchange for listed companies is 31st March. The Commission had in the past continued to

plead for the sector with other regulators for forbearance. Will this qualify for over-regulation?

"Some of your members do not submit annual accounts before Christmas. Going forward, insurance companies must comply with all requisite regulatory requirements without plea subsidies from NAICOM".

Daniel went further "Risk Based Supervision and Market Conduct: Whereas the Commission had issued the Risk Management Framework since 2012 preparatory to transition to Risk Based Supervision, the recent report by Delloitte revealed that its implementation by insurers remains only on paper. Market conduct is another area where the Commission expects the market to be above board but the reverse is the case. The Commission has resolved to issue appropriate regulations that would enthrone these best practices. "

"Suffice it to say that the growth of the industry has remained constrained by the near total absence of risk management practice and appropriate product pricing amongst other issues plaguing the industry. The consequence is massive loss of premium and wealth to stakeholders. No doubt, therefore, that the price of listed insurance companies rarely record market gain while shareholders have not received dividends in the past three to five years in 80 per cent of member companies. Nevertheless, I want to trust that you will advance on the NIA objectives and produce a new market agreement that will be signed by all the insurance companies on the basis of mutual selfregulation. This long outstanding promises of the Council should be your first practical task as you strategize on other concerns.", Daniel said.

The NIA chairman, Godwin Wiggle, jpwever. said as the 21st chairman of the association, I am delighted at the opportunity it has given me to shed more light on our vision for the association during my tenure.




Source: The Guardian