From left: President, Chartered Insurance Institute of Nigeria, Eddie Efekoha and Commissioner for Insurance, Mohammed Kari at an event.
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Chuks Udo Okonta
The insurance sector which ought to provide risk cover for other sectors seemed to be losing its ground as parties it should secure are breaking new grounds leaving it behind. This can be attested to by the recent move by the Central Bank of Nigeria (CBN) to raise the capital base of Micro Finance Banks and mortgage guarantee banks to N5 billion and N6 billion respectively.
The Commissioner for Insurance, Mohammed Kari, who is not happy with the development, said the sector remains the weakest link in the Nigerian economy, adding that an industry that should insure the aviation and other high ranking sectors, should not be seen to have capital less than that of microfinance banks
“We are the weakest link in the Nigerian economy and now we are going to be less capitalized than mortgage guarantee banks with N6 billion and less capitalized than microfinance banks with N5 billion. How can an insurance company that insures the aviation sector have capital less than that of microfinance banks? We should wake up.
“Some insurance operators argue that capital is not important. If capital has no function, how come banks bought over insurance companies that used to be owned by insurance companies? “Insurance anywhere in the world is the mobilizer of funds and provider of security. You cannot provide security if you don’t have capital. How can you approach a microfinance bank of N5 billion and tell them you want to give them protection. What is your capital?
“The claim you pay and the liability you hold is a function of your financial ability. Check any jurisdiction in the world, insurance companies are more capitalized than banks. Breaking the electricity supply jinx “Insurance companies own virtually all the financial sector in the world. They fund infrastructure because they have long term funds to fund long term business. If the insurance industry don’t need capital, why are they the weakest link in the financial sector?
He posited that the current capital of insurance companies was increased 13 years ago, stressing that financial sector leaves capital stagnant for 13 years? In the last 10 years, microfinance banks license have been reviewed five times. That is how a financial sector operates and to a large extent a responsible operator should do these things without regulatory prompting, he said.
Life insurance firms presently parade N2 billion capital base; Non-Life, N3 billion; Composite N5 billion and Reinsurance N10 billion.
