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Chuks Udo Okonta
Amid controversies surrounding the ongoing insurance industry recapitalisation, the Nigerian Insurers Association (NIA) has written a letter to the National Insurance Commission (NAICOM) seeking clear directives on the position of the exercise which the first phase is projected to end tomorrow December 31, 2020.
Inspenonline gathered that the letter was sent to the insurance regulator yesterday.
According to the letter which was entitled: Segmentstion of Minimum Paid Up Share Capital of Insurance Companies in Nigeria: Appeal For Waiver of December 2020 Milestone, signed by the Director-General NIA, Mrs. Yetunde Ilori, the association expressed regret that no information has been received from NAICOM on the request for waiver of the December 2020 deadline for first phase of the recapitalisation exercise.
It noted that the continued silence by the commission on its position is of serious concern to operators. “This is underscored by a fast-approaching deadline and everybody is being kept in a suspense, which is not helping the market at the moment,” it said.
NIA implored NAICOM to kindly respond to its letter and provide a position on other matters to properly guide the operators and all other stakeholders, thereby putting an end to unintended speculations and uncertainties surrounding the ongoing recapitalisation exercise.
NIA also expressed it’s commitments to the success of the recapitalisation exercise.
Recall that the NIA, had 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.