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Chuks Udo Okonta
Poised to align their entire operations with current realities, insurance operators have expressed their desire to pursue the enactment of a new Act that would help resolve the impasse associated with the suspended recapitalisation exercise.
Investigation by Inspenonline revealed that the operators are not comfortable with the procedure adopted by the National Insurance Commission (NAICOM) to recapitalised the sector.
It was gathered that the umbrella body of Insurers – Nigerian Insurers Association (NIA) has on several fora expressed its concern on the definition given to capital by NAICOM in the pursuit of the recapitalisation. The operators, it was learnt had requested for recognition of all fund as admissible capital, a request the commission turned-down, claiming that it contravened the Act presently used to regulate the sector, hence, focused on only paid-up share capital.
Inspenonline findings revealed that the operators had resolved to stand by a report produed by the International Monetary Fund (IMF) which stipulated the type of recapitalisation required by the sector.
A source told this medium that the operators had also requested that the regulator suspend the recapitalisation exercise and give impetus to the passage and signing into law the insurance industry consolidated bill, which, when becomes an Act, will help provide clear slate for such exercise.
According to the source, insurance business should never operate in insolation, as the banking sector and others have aligned with new capital regime, which the bill before the National Assembly was designed to provide.
Determined to achieve their desire, the NIA
recently declared its preferred type of recapitalisation by asking the National Assembly to infused in the Insurance Industry consolidated bill Risk based Capital adequacy template.
Chairman of the Association Ganiyu Musa, had stated that in adopting Risk based Capital adequacy template, the Association took cognizance of the need to consider insurance risk, market risk, credit risk, and operational risk as well as the need to apply such capital charges on assets and liabilities (all capital resources inclusive).
He hinged the Association’s position on the 2013 IMF Report on the Nigerian Insurance Industry which prescribed the risk based capital model as most suitable for the Nigerian Insurance market.
According to him, the IMF report was duly acknowledged and admitted by the National Insurance Commission (NAICOM) as the right capital framework for the market as it seeks to limit the capital required by operators to the level of risks they can carry.
When the Bill is eventually signed into law in line with this proposal, it will lay to rest, the contentious issue of the definition of capital which has been a major point of the Association’s engagements with the Commission during the ongoing recapitalization exercise.
“We are convinced that risk based capital adequacy template is the best fit for the insurance industry in Nigeria especially given the fact that the 2013 IMF Report has prescribed it and the Commission agreed with it.” he stated.
This will also align the definition of Insurance with the various positions such as IAIS recommendations, ICP 17 on Capital Adequacy; European Union Directives On Minimum Capital Requirement; OSSFI (Canada); APRA (Australia Prudential Regulatory Authority); SAM (Solvency Assessment Management) South Africa; Kenyan Model and Malaysian Model.
The IMF peer review report on the Insurance industry in Nigeria 2013, observed that the Nigeria Insurance Industry was over-capitalized relative to other developing countries and recommended that the regulator should review the excessive capital requirement when adopting a risk based capital framework.
Director-General of the Association, Mrs. Yetunde Ilori, emphasized that risk based capital is the direction to go if the insurance industry is to attract the right investment and increase insurance contribution to the Gross Domestic Product (GDP).
She expressed the hope that that given the fact that the insurance companies are searching for funds to capitalize their operations, adopting this definition will make the insurance industry in Nigeria attractive to investors and save about N77 billion payout as cost of recapitalizing.