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Chuks Udo Okonta
The National Insurance Commission (NAICOM) has said it is driven by public interest as regards the insurance industry recapitalisation, while operators are interested in what is good for their operations.
The Commissioner for Insurance/Chief Executive Officer NAICOM Olusegun Omosehin, who said this at an interactive session with journalists in Lagos, stated that the Commission has a position which would be made public soon.
According to him, NAICOM is committed to having a strong and viable insurance industry, adding that the financial sector which insurance belongs is driving the federal government’s $1 trillion economy.
He noted that until insurance industry get to the level where operators are considered before key economic decisions are taking, the industry is just scratching the surface.
Omosehin submitted that NAICOM desire to see successful insurance companies move into states where insurance practice is non-existent, stressing that the industry has not done one per cent of what it should do, which is why the penetration is still very low.
He maintained that NAICOM would continue to be at the fore-front leading the industry’s growth.
The proposed minimum capital requirements in the Reform Insurance Bill for Insurance and reinsurance operations had polarised practitioners as some have considered it necessary while others are kicking against it.
The Nigerian Insurers Association (NIA) has opposed the minimum capital base of ₦25 billion; non-life insurance business; life business N15 billion and reinsurance N45 billion, proposed in the Reform Insurance Bill.
The association made the opposition during the public hearing on the Bill which held at the National Assembly in Abuja.
The Chairman of NIA Kunle Ahmed, who spoke for insurers at the event proposed a minimum capital of N8 billion for life business; N10 billion for non-life and N20 billion for reinsurance and the implementation of Risk-Based capital regime that would enable them undertake risk inline with their capital.
He said the Nigerian insurance sector was not large enough to support the proposed increases in capital requirement without significant adverse effects.
“Insurance is an international business, and we need to consider what is obtainable in other countries, even within Africa,” Ahmed posited.
He cited Morocco, with a capital requirement of $5 million for life and non-life businesses, while Kenya’s requirements are $3.8 million for life and $2.3 million for non-life. He said South Africa has the least capital requirements but has one of the biggest markets.
Ahmed noted that capital alone does not determine the capacity of an organisation or company. “I agree that it determines your retention, but it’s not the single determinant of your capacity. What we risk is that we’re going to have insurance companies that are not deepening insurance business in Nigeria, but are just sitting down and investing the money that they have in other things. I believe that we should focus a lot more on deepening insurance in Nigeria”, he said.
For those who welcomed the proposal, they said it is necessary going by the inflationary trends in the country and the ambitious $1 trillion economy by the federal government.
They also noted that the proposed N10 billion for non-life; N8 billion for life and N20 billion for reinsurance by the NIA has been overtaking by trends that have happened, since it was proposed about five years ago.
They also expressed worry that with the opportunity giving to the banks to return to universal banking, bankers would want to play big in the insurance space, stating that most insurance companies may be caught in a web as bankers throw their weights behind the proposed capital.
A shareholder told Inspenonline that insurers opposing the proposal need to align with current realities, stressing that the industry has remained a poor cousin of the banks owing to operators opposition to growth.
He said while bankers happily embrace recapitalisation and deploy all their efforts to achieve it, insurers would always resist it and remain fringe players in the financial sector.
A Managing Director of an insurance company said the industry needs the capital to secure more risks in the country.
He noted that the industry needs mega insurance firms that can stand at par with their foreign counterparts.
According to him, what is the level of coverage local insurers have in a firm like Dangote refinery? He said most special risks are ceded abroad today owing to insurers low capital.
Amidst this polarization,
Inspenonline gathered that the leadership of the NIA is engaging NAICOM to reach a comfortable minimum capital for the industry.
