The insurance industry is all set to welcome risk based insurance supervision, this was disclosed by the chairman, Nigerian Insurers Association Mr Ganiyu Musa in Lagos at an interaction with reporters.
Musa said said the industry opt for risk based insurance supervision is an ongoing discussion with the regulator, National Insurance Commission, which is working on the framework for that level of supervision. Like in previous drafts, the Commission would expose the draft to the underwriters for inputs and bring same to global practice.
This new front already laced with the approval of the NIA is a new level of collaboration not seen before in the insurance market and it is expected to be listed in the Insurance Bill 2020 which is in the National Assembly. Musa stated that the association is on top of developments on the bill and shares optimism that the bill will be passed into law before long.
He speaks further on the ongoing discussion on the framework of risk based supervision and the recent Finance Act 2021. “We are happy to note that the Finance Act 2021 has been signed into law and this has resolved a major issue with regards to the definition of the components of minimum capital. The Association is engaging the National Insurance Commission with a view to determining the next steps.”
Risk based supervision was deflated when the tier-based capital was challenged by shareholders who had misconceptions about companies restricting their businesses to classes of insurance they have the capital to underwrite. Some shareholders felt their companies would be forced out certain classes of business and restricted to those classes of business that every other underwriter is licenced to operate in.
Recently the MD/CEO Boff and Company Insurance Brokers, Chief Babajide Olatunde-Agbeja, who said he is a supporter of tier-based capital because it fits the underwriter to the business it capital matched, said the botched implementation had adversely affected the growth of the insurance market. He cited Britain’s insurance market where insurance companies and brokers alike specialise in the company’s preferred class of business and offer cutting edge service.
Olatunde-Agbeja said those who went to court to secure an injunction halting the exercise had done disservice to the market because it has stopped the emergence of specialists underwriters and brokers providing exceptional service without entertaining threats from big players.
He noted that Consolidated Insurance Bill 2020 is still receiving legislative attention in the National Assembly and the Association is on top of developments on it. “We are optimistic that the Bill will be passed into law before long,” he posited.
Prior to introduction of the suspended industry recapitalisation, the minimum capital base of life insurers was N2 billion non life, N3 billion, composite, N5 billion and reinsurers, N10 billion.
The regulator in the suspended exercise, raised the minimum capital to N8 billion for life, N10 billion for non life, N18 billion for composite and N20 billion for reinsurers.
The anticipated revised guideline which would be risk based, will tier the businesses, though with a minimum capital, which is not too far from similar tier based policy adopted by the regulator in the past but was halted by letigations instituted by some parties.
Risk based recapitalisation will enable operators operate according to their capital strength.