About 260 non-executive directors of insurance companies will vacate their seats at the end of March 2016, investigation has revealed.
Their exit is expected to come a year ahead of other executive directors who will also be compelled to quit the various boards of insurance companies in 2017.
Our correspondent learnt on Thursday that all the 58 existing insurance companies in the country would be affected.
The concerned non-executive directors are said to be those that have been on their companies’ boards since the end of the recapitalisation of the sector in 2007 and have spent up to nine years in such positions.
The Commissioner for Insurance, Mr. Mohammed Kari, who confirmed the development, told our correspondent that the National Insurance Commission took the action to enforce the regulations as stipulated in the code of good corporate governance for the industry, which was released in February 2009.
“By the first of April, you wouldn’t find anybody on the board of any insurance company that has been there for more than nine years,” he said.
Section 5.04 (vii) of the 2009 corporate governance code states that “non-executive directors shall not be re-nominated and appointed for more than three terms of three years each.”
Kari said NAICOM had issued the code before that of the banking sector came on stream, adding that during a recent meeting with directors of the insurance firms, the commission told them that the code must be fully implemented by April 1.
Although the code was very clear about the tenure of non-executive directors, he noted that it was silent about the tenure of executive directors.
Only last year did the commission release an exposure draft, which specifies the tenure of the executive directors. The draft puts the tenure of chief executive officers at a maximum of 10 years.
Kari explained that NAICOM had been silent about the draft because a week after it was issued, the Financial Reporting Council released another one, which was meant to apply to all operators in the financial sector.
“We decided to wait for the implementation of the FRC code but we realised that it is taking too long; that is why we decided to enforce the one we have already, which is also good enough for a start,” he said.
He, however, said the section on limited tenure for executive managers was non-negotiable.
According to him, studies conducted after the financial crisis in 2008 showed that the sit-tight attitude of management personnel in many economies was largely responsible for the problem.
The commissioner said it was in the interest of the investors to have succession plans for insurance companies and stressed the need to continue to review their programmes.
He said the term proposed in the draft was similar to what the FRC gave in its draft, adding that it was reasonable enough for everyone to serve twice and leave.
“We argue that we don’t have people to take over but it is the fault of the managing directors. Why haven’t they trained people to take over or build structures? Apart from death, they can fall ill or travel and someone must be in control,” he said.
Kari described the stay-put attitude of many leaders/managers as a bad corporate structure, which NAICOM was going to discourage.