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Chuks Udo Okonta with agency report
The Chairman of Nigerian Insurers Association (NIA) Kunle Ahmed, has said
Nigeria’s current capital requirements were relatively competitive within Africa, but the market size in other countries far surpasses it.
He disclosed this at the recently public hearing on the Reform Insurance Bill, head in Abuja, adding that South Africa’s market is approximately $50 billion per capita, Kenya’s is over $1 billion, while Nigeria’s non-life business is only $0.63 billion and life business is $0.43 billion.
“This means we have significant capital chasing limited transactions,” he submitted.
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.
The NIA Chairman contrary to the N25 billion for non-life; N15 billion for life and N40 billion for reinsurance proposed in the Bill, proposed a more balanced approach, recommending a minimum capital requirement of N10 billion for non-life and N8 billion for life insurance, which would make Nigeria the most capitalised insurance market in Africa. “Our focus should be on deepening insurance in Nigeria,” he said.
Addressing other provisions in the bill, Ahmed raised concerns about the proposed contribution of one per cent of net premiums to a fund for road accident victims. “This effectively uses the funds of insured individuals to support those who do not have insurance.
He suggested limiting this contribution to 0.5 per cent and urged the implementation of measures to ensure all vehicles in Nigeria are insured.
“We have about 11 million cars in Nigeria or 13 million cars and about 3 million or 3.4 million cars insured. In other words, we are saying that the small people that are insured should take care of the larger number of people that are not insured. We suggest we should limit this to 0.5% We must fashion up a way of ensuring that all cars in Nigeria are insured”, he argued
Regarding the bill’s mandate for claims to be paid within 60 days, Ahmed acknowledged the need for prompt payments but pointed out the complexity of the claims process.
Ahmed criticised the severity of sanctions prescribed for infractions within the bill, describing them as disproportionate. He highlighted section 100, sub-section 5, which imposes a punishment five times the required contribution to the road accident victims fund. “Encouragement, not excessive punishment, is necessary for compliance,” he noted.
