Underwriting firms pay over N200m for infractions

By: ZAKA KHALIQ (Newswatch Times Newspaper)

Following the over N200 million monetary fines paid by erring insurance firms to the regulatory authorities for infractions, shareholders have expressed their dissatisfaction, claiming that the Nigerian Stock Exchange(NSE), Securities and Exchange Commission(SEC) and the National Insurance Commission(NAICOM) are milking insurers dry.
This, they said, affected the financial strength of underwriting firms as some of them are not in a better position to declare dividend or bonus to shareholders, after coughing out millions of Naira as fines to the regulatory authorities.
NSE had set 31st of March as the deadline date for listed entities to submit their financial statements of the previous year, while failure to comply attracts monetary fines from NSE and SEC, until the affected firm is able to submit the account.
In the same vein, NAICOM has given insurance companies till June 30 by to submit their accounts, failure to comply will attract N5,000 each day after the deadline until the concerned firm submits the financial report to it for approval.
Over time, underwriting firms have found it difficult to comply with these deadlines, hence, they were made to pay monetary fines, until they were able to comply, a development shareholders are unhappy with.
The shareholders, who expressed their grievances at the Annual General Meetings (AGMs) of the eight underwriting firms that had so far held, were unhappy that their companies had to cough out several millions of Naira as monetary fines to the regulators, thus, clipping the wings of the companies to pay meaningful dividend or bonus to shareholders, while some had their accounts in negative as a result of the huge fines.
They alleged that NAICOM, on most occasions, deliberately delays the approval of accounts in order to charge insurers. The shareholders, however, called on the concerned underwriting firms, to work closely with the Nigerian Insurers Association (NIA) to make their grievances known to these regulators, noting that if the need be, they should carry their protest to the National Assembly (NASS).
 Mr. Robert Igwe, a shareholder said regulators, especially, NAICOM, should try to be considerate in meting out punishment to insurance companies, noting that the current regime of sanctions is depriving insurance companies of income to pay the shareholders dividend or bonus. “NAICOM should not just be penalising insurance companies at a time when most of these companies are not making profit.
The ones who make little profit end up spending it to pay penalty on infractions. On the other hand, NAICOM has a way of delaying approval of accounts so that companies can be penalised,” he alleged. Noting that all insurance companies that have done their AGM so far, have paid one form of fine or the other to the regulatory agencies, he said, this is not good for the image of insurance industry.
Operators, through NIA, he said, should try to comply with regulations to avoid sanctions, stating that insurers should liaise with regulatory authorities, to so see whether waivers could be granted to them, should in case there is tangible reason for late submission of accounts.
Mr. Akinsanya Solomon, another shareholder, said the regulators ought to take into consideration the challenges of insurance industry and try to have mercy on players in that sector.
“NAICOM is too brutal to operators in insurance industry. They should close door for business, if they have no other means to make money than relying on fines,” he noted.
Other shareholders, such as Micheal Cole, Kola Alaga, Chief Timothy Afolayan, among others, equally shared the same sentiment, believing, the sanctions are becoming too many and robbing shareholders, who have invested so much in the companies, of profit.
On the other hand, insurance companies have paid over N200 million as monetary fines for infractions to SEC and NSE for offence ranging from inability to submit their financial statements to the regulatory authorities as at when due, among others. In 2014, 21 underwriting firms paid N60 million fines to NSE for failure to submit their 2013 financial accounts to the regulatory body on or before March 31.
This doesn’t include the fines, running into several millions of Naira, paid to SEC and NAICOM as well. In the current year (2015), about 21insurance firms paid N39.9 million fines to NSE for late submission of their 2013 and 2014 accounts, which could rise as high as N60 million, if the fines being paid by defaulting underwriting firms to NAICOM and SEC for the same offense, are added.
For instance, Prestige Assurance paid over N20 million fines in 2014, so also is Cornerstone Insurance and Royal Exchange Insurance Plc, which were said to have paid over a N100 million each as monetary sanction for failure to submit their accounts on time to the regulatory bodies.
Speaking earlier on sanctioning of insurers, former Commissioner for Insurance, Mr. Fola Daniel, said the commission does not bear any company a grudge, provided such firm operated in accordance with the stipulated guideline.
He said the commission has no reason to delay a properly prepared account, stating that the regulatory body is quick in approving such account. He pointed out that the reason for delay in approval of some accounts was because there were infractions and errors that needed to be corrected before such accounts are approved.
 “We have no reason to delay any account beyond two weeks, if it follows the necessary requirements,” he said. He stressed that the monetary sanctions on late submission of account, was a means to ensure that underwriting firms submit their accounts on time to the regulatory authority for approval so that they can go ahead to conduct their AGMs.
The motive of such fines, he said, was for shareholders to call their respective companies to order whenever they violate certain provisions in the guideline, saying, the commission is doing its best to protect the interest of the policyholders. If a company did not default, NAICOM had no right to fine such firm, he noted.
On the other hand, the Chairman, NIA, Mr. Godwin Wiggle, stressed that the association is trying to persuade its member insurance companies to submit their accounts on time to the regulatory authorities to avoid paying huge monetary fines that could have made a lot of impact on their balance sheets.
He said the reason for increased level of fines paid to the regulators was because some companies were still grappling with the challenge of submitting their accounts in the International Financial Reporting Standard (IFRS), noting that the rate of compliance, though might be steady, but is on the increase.
According to him, “As an association, we are not happy with the level of fines insurers pay for late submission of accounts. Now, we have measures in place to checkmate our members on strict compliance to regulatory guidelines. We have a new committee, compliance committee, through which we ensure that fines are eliminated,” he said.