Insurance companies in the country will no longer have the same capital base, as the risk they undertake will determine the level of their capital.
Consequently, the National Insurance Commission (NAICOM) has ordered insurance firms to upgrade their capital in this direction.
Speaking at the Insurers Committee meeting in Lagos over the weekend, the Managing Director, Leadway Assurance Plc, who is the Chairman, Sub-Committee, Publicity and Communications of the Insurers Committee, Mr. Oye-Hassan Odukale, operators and the commission have agreed to transit to risk based supervision that would enable operators shore-up their capital in line with the businesses they want to underwrite.
According to him, “We had a lecture from NAICOM on risk based supervision, which is where we are transiting to. With risk based supervision, there would not be common capital base for insurance companies again, companies have to determine their capital in line with the business they do.”
The board of insurance companies, he stressed, would have the responsibility of determining the risk capital for their companies which would be supported by the appropriate capital, saying this is new in Nigeria.
Just like like the International Financial Reporting Standard (IFRS), he said, ‘we are transiting to this new initiative and NAICOM is taking us through it so that we can move our capital structure to this base.’
Risk based supervision (RBS) requires supervisors to review the manner in which insurers are identifying and controlling risks. It equally requires supervisors to assess system and individual firm risk and to respond with the supervisor’s own processes and interventions in line with the assessment. This, in turn, allows supervisors to allocate resources to the insurers with the greatest risk and areas within individual insurers that are high risk. RBS involves supervisors assessing four factors: inherent risk, controls, residual risk and additional support.
Meanwhile, Odukale also disclosed that NAICOM would commence the implementation of insurance industry’s code of corporate governance in 1st of April, 2016.
“We also discussed the corporate governance code which was introduced by NAICOM in 2009, but for some reasons we have not been so firm on it. We were told that from April 1st, NAICOM is going to enforce the code. NAICOM has agreed that since the Financial Reporting Council (FRC) is coming up with a new code, we would allow the FRC code, when is it out, to supersede the present code. We are giving up to April to make sure we comply with the 2009 code,” he said.
On his part, Deputy Commissioner, Finance and Administration, NAICOM, Mr. George Onekhena, said the parties had resolved to have representatives from insurers and NAICOM to look into some issues and challenges that insurers have with the commission and fashion ways to resolve them.
At the end of the meeting, some operators were appointed into different sub-committees.
The sub-committee chairmen are: Oye-Hassan Odukale of Leadway Assurance, Chairman Publicity and Communications; Eddie Efekoha (Consolidated Hallmark) Chairman Technical; Val Ojuma (FNB Life) Chairman, Corporate Governance and Government Relations, Tope Smart (NEM Insurance) Chairman Market Development; Femi Oyetunji (Continental Re) Chairman Prudential and Keith Alford (Old Mutual) Customer Services.