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Chuks Udo Okonta
The National Insurance Commission (NAICOM) has said insurers in Nigeria control assets, many of which are held over the long term, thereby subjecting the insurance sector to significant Environmental, Social and Governance (ESG) risk.
The Commissioner for Insurance Sunday Thomas, said this today in his keynote address at the ongoing Insurance Industry Professionals’ Forum in Abeokuta, Ogun State, adding that the industry must develop a wide range of new skill sets and orientation which enables adaptability and agility.
He noted that the theme for this year’s forum, ‘Sustainability of the Insurance Industry
in the VUCA Environment’ as couched by the organisers reflects the current realities
of businesses in the country as well as on the global scale, as the environment has
become so volatile, uncertain, complex and ambiguous; change is now the norm.
Thomas submitted that it has
become imperative for the industry to constantly identify and respond timely to
emergent issues that can affect the sustainability and continued existence of insurance business and the industry.
“Whether we believe it or not, the prevailing norm of constant and unpredictable
change has now altered how we view the world and in effect how we respond to our
ambiguous business milieu. It has also forced changes in how we conduct our day-to
day activities as business leaders, executives or managers,” he posited.
According to him, the volatility in the stock market, rapid changes in the technological hemisphere and the uncertainty occasioned
by regulatory changes such as data privacy rules as well as the competitive scene
along side disruptive start-ups and changes in consumer tastes are typical cases in
He maintained that communicating in a diverse cultural and linguistic environment, global supply chain complications including strategic choices based on inadequate information and ethical dilemmas have led to complexities and ambiguities which have impacted hugely on the global economy including Nigerian insurance sector.
The insurance regulator said risks of businesses today are certainly different from the past, adding that the business environment is advancing more into Artificial Intelligence, Environmental, Social and Governance issues and will continue to experience issues relating the increased cyber security threats, natural disasters, acts of terrorism, economic volatility and more
He submitted that reliance on information technology and the associated cyber security threats are examples of such risks where the corresponding strategies to mitigate cyber exposure have been playing catch-up in the Nigerian insurance industry.
He pointed out that technological glitches and exposures to the corresponding operational risks have risen as the world pivoted to remote and hybrid working post COVID-19 pandemic period across the globe further compounded by skilled labour shortages exacerbated by the “Japa” syndrome in the
Nigerian insurance industry.
He stated that to navigate this “new normal,” the industry must develop a wide range of new skill sets and orientation which enables adaptability and agility and that the industry must adopt strategic foresight, continuous learning and development as well as effective communication and transparency.
He noted that all of these require adjusting operating models and workflow processes in doing business today.
“There has been an increased awareness of climaterelated risks and their potentially
devastating effects on society. This has increased focus on the significance of ESG factors in insurers’ underwriting business as well as in investment portfolios. Insurers in Nigeria control assets, many of which are held over the long term, subject the insurance sector to significant ESG risk,” he posited.
The NAICOM boss said regulatory requirements to enhance ESG disclosures and considerations, are gaining global popularity and key stakeholders, including major institutional investors, increasingly desirous of greater ESG accountability from insurers.
According to him, in order to successfully compete in a new VUCA environment, insurers need to develop a new set of tools and methods and apply them swiftly and
thoroughly, stressing that some of the most essential taxonomies includes, strategic savviness (vision), artificial intelligence (understanding and clarity) and organisational agility
(agility and virtual). As aptly put by Frederik Bisbjerg h(2023) “In a world they haven’t seen before, insurers must do what they haven’t done before if they want to stand a chance to succeed.”
“On the Commission’s part, in recognition of the realities of today’s changing world and
the increasing utilization of e-platforms as necessitated by recent changes in the world
especially the outbreak of COVID-19, the Commission had implemented a lot of
technological transformation programmes such as the deployment of Business Process Management (BPM) Solution and the NAICOM Portal Projects which were concluded in 2021 and went live in 2022,” he submitted.
According to him, the BPM is currently being used to process relevant
applications while the NAICOM Portal remains the focal point for generation of unique policy identification numbers for all policies as well as repository for statistical data including verification of insurance policies issued in Nigeria.
He said an integration of Vehicle Registration (VREG) with NAICOM Portal was implemented and configuration of Virtual
Private Network has been completed to enable staff work remotely.
He maintained that work on the development of the Regulatory Returns and Analysis Module is ongoing
while a Complaints Management System designed to facilitate real-time Complaints and Dispute Resolution has been concluded and deployed, while the training for insurance operators and the corresponding guidelines are being worked on.
Thomas stressed that the adoption of risk base approach to supervision by the Commission is another giant stride in the area of long time plan for business continuity and sustainability in the sector. In recognition of the fact that insurance supervisory systems have evolved beyond rudimentary observance of rules, significant milestones have been achieved in our quest to transit from compliance-based supervision to Risk-Based Supervision
(RBS) which is focused on assessment of insurers’ governance, risk management and adequacy of internal controls, and whether the solvency and liquidity of the insurer are sufficient to withstand unexpected shocks.
He said to also mitigate some of VUCA risks, the Commission has entered into a technical partnership with FSD Africa to facilitate attainment of some of the
accompanying objectives of the partnership which includes: Development of a framework for sustainable innovation in the Nigerian insurance industry in fulfillment of the Commission’s dual objectives of market development
and protection (Regulating for innovation) as well as understudied the Nigerian
insurance industry and developed an implementation plan for full implementation of Risk-Based Capital (RBC) framework including the key steps, frameworks, and tools required for RBC implementation.
Conducted a Diagnostic Report on ESG and also developed the ESG toolkit for the Nigerian insurance industry.
Work has also been concluded on the Guidelines on Regulatory Sandbox and the BimaLab Nigeria Insurtech Accelerators Program was also implemented in 2022
which saw to the successful mentorship and refinement of ideas/projects of 10
He noted that the ESG project, which was designed to formulate and implement proportional and
fit-for-purpose ESG supervisory instruments (e.g., ESG policies) in the insurance
sectors, is particularly important to sustainability of the Nigerian insurance industry, adding that this because insurers play a crucial role in transferring severe risks affecting societies by developing responsible tools in underwriting and investment practices (e.g., scenario analysis and stress testing).
He submitted that ESG integration requires complex
coordination between regulators and insurers, as well as indepth knowledge of ESG risks and that because of this a committee was constituted to develop ESG framework for the Nigerian Insurance Industry.
President of Chartered Insurance Institute of Nigeria (CIIN) Edwin Igbiti, said in today’s rapidly changing world, the insurance industry is faced with unique challenges stemming from the volatility, uncertainty, complexity, and ambiguity (VUCA) that characterises our environment, adding that as professionals in the field of insurance, it is crucial that professionals come together to address these challenges and explore innovative solutions that will ensure the sustainability of their businesses.
He maintained that the
conference provides professionals with the perfect platform to exchange knowledge, engage in insightful discussions, and learn from the experiences and strategies of industry experts.