• Thursday, June 13, 2024
businessday logo

BusinessDay

Govt owes N24bn to insurance industry, risks its assets, people

‘Insurance industry total assets moved to N2.5trillion in 2022’

With government already owing N24 billion in insurance debts as at January 2013, and the new policy of “No Premium No cover” currently making insurance credit almost impossible, there are fears that Nigeria faces huge loss on compensation, should there be a major national disaster.

This is premised on the fact that government, which is known to pay insurance premium in arrears, is unable to secure cover with insurance companies for protection of its assets and the lives of public sector workers.

BusinessDay investigation shows that this is causing concerns in the corridors of power, as government, through its ministries, departments and agencies (MDAs) will now have to contend with payment of insurance at the same time with other lines of expenditures, or leave itself exposed, should a major loss occur.

This is especially as the Presidency, through the ministry of finance, has directed all MDAs to insure their assets, while also obeying the policy directive of the National Insurance Commission (NAICOM) on “No Premium No Cover.”

At the same time, the insurance companies and brokers are cautiously watching their backs, so as not to be caught by the industry regulator, to be providing insurance cover without collection of premium.

Read also: Insurance recapitalization looking good as funds flow into industry

This development, no doubt has created a market gap in terms of premium generation and projection, as government and corporate organisations which could not pay premium immediately, have either cut their insurance, or have suspended it temporarily.

Fola Daniel, commissioner for Insurance, had said that there was no going back on the policy, as there would be no exemption, assuring that as adviser to the government it’s hopeful government would behave as a good corporate citizens and obey the law, by paying their premium for covers bought.

Sunday Thomas, director-general, Nigerian Insurers Association (NIA) told BusinessDay in an exclusive interview on the situation with government insurance, said “NAICOM has been pro-active in this respect by getting the Ministry of Finance to send out letters to all MDAs on the implication of non- payment of premium for their insurances.”

He said with that, there was no doubt that most of the MDAs must have made arrangement for the payment of premium due.

On the implication of a major disaster that could affect government assets and the lives of its workforce, Thomas said “all duly insured properties for which premium has been paid will have their claims settled.”

Section 50 (1) of the 2003 Insurance Act, stipulates that “the receipt of an insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of the insurance risk unless the premium is paid in advance.”

In implementing the law which became effective January I, 2013, NAICOM warned that any insurance company found with unpaid premium for policy granted to clients, would be sanctioned or have its licence revoked on extreme cases.