NAICOM prepares insurers for risk based supervision

Chuks Udo Okonta 

The National Insurance Commission (NAICOM) has organised a seminar to increase the level of awareness of insurance operators in readiness for smooth implementation of Risk Based Supervision (RBS) in full scale.

Deputy Commissioner Technical NAICOM Mahammed Kari at the seminar hosted by Munich Re Africa in Lagos, said this is coming on the backdrop of arrangement that has been concluded by the Commission for the adoption of RBS approach to the supervision of insurance and reinsurance Companies in Nigeria.

He said the Commission is saddled with the responsibilities of ensuring effective administration, supervision, regulation and control of insurance business in Nigeria as provided in Part II, Section 6 of National Insurance Commission Act of 1997. Just as the financial system has evolved, so too has the supervisory framework. 

"We believe that a sound regulatory and supervisory system is necessary for maintaining a fair, safe and stable insurance sector for the benefit and or protection of the interests of stakeholders, as well as promote stability of the financial system.

"In its earlier forms, supervisory approaches tended to be ‘compliance-based’, aimed mainly at ensuring compliance with the rules laid down for financial soundness and the conduct of business. 

"The risks associated with compliance-based approaches are that they may lead to excessive focus on observed non-compliance and to insufficient understanding of key business drivers and flaws in risk management practices of insurers. 

"However an element of compliance monitoring is necessary in any supervisory approach to ensure that essential minimum standards are met and that the overall regulatory and supervisory regime has credibility," he said.

He urged operators not to see the RBS as the regulator trying to introduce or push a new concept down their throats, but as a opportunity to imbibe the culture of risk based management.

Kari noted that under the RBS regime, operators are expected to instilled, awareness and risk management culture; board and management commitment; corporate governance practices; internal audit and control; relevant information technology infrastructure; financial analysis; risk management practices and model; effective compliance function; regulatory reporting and compliance; training on an on- going basis and collaboration.

He said over the years the provision of Insurance service has developed to sophistication level beyond the imagination of the early practitioners. Coupled with other external risks and incidences the profession has had to evolve as fast to continue to survive and be relevant, stressing that uninformed observers have created an impression that too many changes are coming to the profession too frequently, but individuals, company’s and market’s experiences would confirm that survival have been the biggest driver.