CBN gives conditions for operations of bancassurance

Chuks Udo Okonta 

Central Bank of Nigeria (CBN), has issued a new set of guidelines for banks providing bancassurance, mandating them to conduct thorough due diligence/pe­riodic assessment on se­lection of insurance partners, which must hold valid operational license from National Insurance Commission (NAICOM).

The directive in a circular to banks and signed by Director of Banking Supervision, Mrs. Tokunbo Martins, said it was part of its measures to effectively regulate transactions on General and Life Insurance among banks.

She specified that banks shall not engage in any other model of bancassurance other than that allowed under these guidelines and for which approval has been obtained from CBN.

However, the apex bank stated that the guidelines were issued based on recent devel­opments and the need to ensure synergy in the financial system in exercise of its power un­der Section 33(1)(b) of the CBN Act 2007 and the provision of Part 2, Section 3, Item(l) of the CBN Scope, Conditions & Minimum Standards for Commercial Banks Regulathe CBN Scope, Conditions tions No. 01, 2010. ­

It set out the regulatory framework for the offering of bancassurance products through the non-integrated referral model.

The choice of this model, according to CBN, was pre­mised on the fact that it does not preclude banks from focusing on their core bank­ing businesses and does not undermine the essence of CBN’s New Banking Model Bancassurance products.

Under the guidelines, the apex bank directed banks to enter into agreements with insurance companies, but should not engage in any other model of bancassur­ance other than that permit­ted under these guidelines and for which approval has been obtained from it. It stat­ed that banks should not of­fer banking products that in­corporate insurance features.

In addition, they were also prohibited from offering free premium payments as a feature of any of their prod­ucts as well as providing the bancassurance products in a manner that contravenes the new guidelines or any other statutory provision or law that applies to insurance products and services.

On the required agree­ment between the banks and insurance companies, CBN directed that the re­ferral model of bancassur­ance arrangement between a bank and an insurance company shall not be valid without an executed Ban­cassurance Agreement just as it restrained banks from undertaking any insurance marketing, underwriting or claim settlement.

Similarly, the guidelines provided that banks shall ensure that no risks are transferred to it and shall not assume any fiduciary responsibility or liability for any consequences, financial or otherwise, arising from the subscription to insurance policies by customers.

Other conditions set by the apex bank for bancas­surance product transactions are, “Deposit Money Banks (DMBs) shall conduct a thorough due diligence/pe­riodic assessment for the se­lection of partner insurance companies, which would be restricted to two insurance companies; ensure that only bancassurance products ap­proved by relevant regula­tory authority are offered to their customers by the insur­ance companies and shall not enter into bancassurance agreement with insurance companies who do not hold a valid operational license from National Insurance Commission (NAICOM).”