NAICOM Forecloses Bailouts For Failing Underwriters.
The National Insurance Commission (NAICOM) weekend foreclosed bailouts or any form of financial assistance to failing insurance companies that can no longer meet up with obligations to policyholders.
The commission came out with this declaration to lay to rest, expectation or request for any form of financial support to assist failing underwriters to meet obligations to clients some of whom had been issued with discharge vouchers which ought to be honoured within 90 days but which are still outstanding two years after.
Standard Alliance is one of the failing companies that issued a discharge voucher which was duly signed by a client on April 5, 2019, for the sum of N1.44 million on an insurance policy, “Income Protection Policy”. Such voucher, according to NAICOM means that the company has formally agreed to a claim which should be dispensed within 90 days. Until now, however, the payment is still outstanding despite two reminders to the company and also to the Commission of which the last was acknowledged on April 19 2021.
General financial downturn and poor investment decisions have weighed on the fortunes of some insurance firms in Nigeria and had pushed them to the brink prior to the Covid pandemic which ravaged the global economy and forced many businesses to close down.
The Commissioner for Insurance Sunday Thomas weekend at the NAICOM’s annual seminar for insurance journalists declared that the commission is not empowered by law to dish out financial bailout to ailing underwriting firms that must at all times, be alive to their responsibilities.
Responding to questions on the insolvency of insurance firms and the protection of policyholders, at the Seminar themed, “Corporate Strategic Plan of the Commission 2021-2023”, Thomas said the commission can only support firms through their supervisory practices which assist insurance firms to tackle their challenges.
“The insurance law does not give us the power to grant bailout to ailing insurance companies. However, through supervisory practices, either through on side and off side reviews, we take a look at certain indicators that an insurance firm could hit insolvency, and we assist in an advisory capacity”.
“We also handle the issue of capital injection that would meet liabilities. Any company that fails to meet recapitalisation requirements would be cancelled. The issue is about liquidity, not solvency.
He explained that the commission had several times gave marching orders to failing companies to pay up agreed claims on which discharge voucher had been issued but noted that the general state of the economy has prevented the firms from selling their assets to liquidate their obligations.
He noted that many of the firms have good and valuable assets but their problems are about liquidity while efforts to dispose of some of these assets to pay their clients have been fruitless.
“Concerning liquidated companies, we do our best to make sure policyholders are protected but the problem is that most liquidated companies have problems disposing of their assets to meet their liabilities”, Thomas noted.
NAICOM’s position conflicts with that of the banking sector where ailing lenders have been rescued financially by the Central Bank of Nigeria (CBN) through bailout and also outright take over by the Asset Management Corporation of Nigeria (AMCON), a debt-buying firm. The latest is Skye Bank which transited to Polaris bank following the intervention of the CBN.
Thomas reeled out the Commission’s achievements in the last year, saying that five licences have been given to the operators, which include four insurance companies and one reinsurance company after nine years and 32 years, respectively. There’s however need to improve the sector as we move on.
“Since I assumed office a year ago, we have done so much to change the fortunes of the insurance industry in Nigeria.
“Under my watch, five licences have been given to operators, which includes four insurance companies and one reinsurance company after 9 years and 32 years, respectively. There’s however need to improve the sector as we move on.
“Out of the five companies, three are life operators. Today, one area that is driving the commission is the life operation. If you look at the South African Insurance market, it is dominated by the life insurance business. Today, pension contributions are well over N12 trillion and the bulk of this is expected to come to the insurance sector.
“We also know that with the engagement we have had with the Nigerian Content, there’s going to be an increase in the Nigerian energy business and the law backing the Nigerian Content Act that is expected to block leakages would be enforced. This means that life operations would grow, that is why we are concentrating on re-insurance companies to drive it for the people,” Thomas said.
Like the banking and financial sector, Thomas said that the Commission would pursue the financial inclusion drive and take insurance down to the people at the lowest level.
“Financial inclusion is now a national policy, taking insurance to the people at the lowest level. Two Takaful Insurance companies have been licensed and four are on the verge of being licensed. If we properly take care of the supply side, the gains would be there for us to take.
“The insurance sector is knowledge-based, so the demand for skilled professionals has continued to increase. Training and exam have been done for skilled professionals and we have made a pledge to have about a hundred Actuarial analysts who would use statistical modelling and risk management strategies to develop financial projections, cost-benefit analyses, and insurance plans for our industry.
“I will also want to say that we are conscious that technology drives business. We have moved extensively from where we were as the commission’s portal first phase has been completed.
“We’ve picked the strategic plan for 2021 and we are running with it. One of the low hanging fruits is the government business and many states are far from benefitting from insurance but we are drawing them closer and are committed, especially in making it mandatory for all agencies of government to make adequate provision for their insurance,” Thomas said.
The Commission’s 2021-2023 strategic plan according to the Head Department of Corporate Strategy and Special Tasks, Usman Jankara, explained that the strategic plan was built around five objectives, including establishing effective and efficient service delivery, ensuring a safe, healthy and stable insurance industry.
Other objectives are to adequately protect policyholders and the public interest, to improve confidence in the insurance industry, to encourage innovation and to promote the development of the insurance market.
According to him, the objectives will consolidate the 2016-2020 strategic plan with new milestones required to allow the commission to accomplish its mission.
Jankara also noted that some of the Commission’s 2016-2020 strategic plan were not met as a result of the pandemic and other extraneous factors.
“Our strategic plan has simplified what we are going to focus on and we are now more confident that we will do much better this year.
“We want to have a stable insurance industry to be globally competitive and contribute to the country’s economy,” he said.
Similarly, the Head of, Information Technology Department Abiodun Aribike, said the commission has upgraded its portal to eradicate bogus insurance and deepen insurance penetration.
In a thorough display of the Commission’s IT prowess and the drive to make information about its activities accessible to everyone, Aribike said that the Core element of their Digital Transformation process were People, Processes (series of actions) and Technology, adding that people are the most important of the three.
According to Aribike, the new NAICOM portal is developed to aid their supervisory duties, as well as enforce the regulation. He also said that it has the features to check fake insurers and identifies unique policies.
Among other features, the portal captures all insurance issues and policies in the country with unique identification and proper accountability; Captures all businesses done by brokers, has easy access to data; validates all insurance issues and enables NAICOM to monitor the payment process between policyholders and operators, whilst also aiding law enforcement agency to locate unscrupulous vendors.
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