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Chuks Udo Okonta
The National Insurance Commission (NAICOM) seems to be between a rock and a hard place has it weighs the consequence of withdrawing the operating licences of some insurance companies that are almost insolvent, unable to settle claims and meet other financial responsibilities.
A source in the commission told this medium that the regulator is daily inundated with complaints from the public on companies that are unable to meet their claims responsibilities, adding that such default is enough to withdraw operating licences of the firms, but the commission is careful in adopting such step as it would further batter the image of the industry and knock-out the gains already achieved in getting the public to embrace insurance.
According to the source, the commission is optimistic that the ongoing recapitalisation would help weed-out the weak firms, without causing more harm to the sector.
Investigations by Inspenonline revealed that some companies that are unable to pay claims are having a running battle with claimants, who sometimes barricade the entrance to the firms.
It was also gathered that claimants on several occasions have gone to some companies to protest and demand payment of their entitlements.
Interactions with some insurance marketers also revealed that the public now refrain from insurance due to the negative experiences they had with companies over the payment of their claims.
According to the marketers, selling insurance had become very difficult in recent times as many people are no longer interested in buying insurance products due to the sour taste they got from their insurers.
It was also gathered from a broker that a firm which is presently on a legal battle with its former Managing Director over unauthorised expenses running into N5 billion, is struggling to pay claims and brokers commissions.
The broker noted that most brokers have severed businesses with the underwriting firm, a decision that would further plunged the firm in serious financial maladies.
The Commissioner for Insurance, Mohammed Kari, said, the ongoing recapitalisation will allow insurance companies in the country to retain huge risks which are presently ceded abroad.
He noted that the recapitalisation exercise will allow local insurers to retain huge risks in the country, thereby, avoiding premium flight, that will, in the long run, increase the profitability of the sector and its impact on the nation’s economic growth and development.
While stating that the recapitalisation is long overdue as foreign exchange rate, asset replacement values as well as claims volume have increased in the last 12 years, he added that, operating with the current capital base is putting insurance firms at risk.
He said, insurance operators are fond of resisting recapitalisation exercise, whenever the idea is mooted, saying, some insurers prefer to continue to write huge risks in aviation and marine sectors, with small capital, a development, he said, was responsible for why some underwriting firms are struggling to pay claims.
On whether there is the need for recapitalisation exercise at a time the country is transiting to Risk Based Supervision (RBS), he said, there is no insurance industry all over the world that do not have minimum capital requirement, which is usually, the entry point.
“All over the world, there is usually, an entry point , which is the minimum capital requirement for an insurer to underwrite risk in a country. Other decisions whether to increase the minimum capital or maintain it, is taken thereafter. So, even under risk based, the minimum capital still exists.,” he said.