The delay in passing the Consolidated Insurance Bill is pulling the plug on efforts to adopt the risk-based capital (RBC), a recapitalisation model that allows insurance companies to take risks based on the size of their capital.
The Consolidated Insurance Bill, which has been in the pipeline for over 13 years, seeks to create the regulatory environment that allows the regulator, the National Insurance Commission (NAICOM), to implement risk-based capital among other critical market reforms.
Rasaaq Salami, head of corporate communications and market development at NAICOM, said the industry is at the finalisation stage of risk-based supervision (RBS), after which it will advance to RBC and other critical reforms that have been incorporated in the insurance industry’s 10-year strategic growth plan.
Salami said: “For the risk-based supervision, we are progressing, emphasising the exhaustive nature of the exercise which is leading to the commission’s RBS team engaging each of the insurance companies and evaluating their position as foundation for kick-off of the reform.”
He said the commencement of RBC depends on the completion of RBS, expressing the hope that this stage would be completed by the end of 2024.
Ebelechukwu Nwachukwu, chairman of the sub-publicity committee of the Insurers Committee, said after a meeting in Lagos that RBS was ongoing.
She said: “As you know, the regulators had visited a lot of offices and we noticed some exceptions from the visit, for example the use of unlicensed agents, and the regulator has spoken to us very strongly about ensuring that all the agents or brokers we use are licensed.
“The regulator said we should make sure that their licenses are up to date and renewed as against doing business with brokers who are not registered or operating with expired licence, calling for self-regulation as foundation for risk-based supervision.”
She also noted that the Consolidated Insurance Bill is important to the industry, saying efforts were being made by the regulator to ensure that the bill is passed as soon as possible.
She said: “We took some conversations on the Insurance Bill and how important it is to be passed and the regulator assured its continued engagement with the National Assembly to make sure we have that bill passed.
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“There are lots of issues we discussed, but the strongest part is how important RBS and RBC are to our operations. Those two concepts are recommended very strongly as part of the 10-year Nigeria Insurance Industry Strategic Growth Plan.”
The Nigerian Insurers Association (NIA) had in a presentation at a public hearing on the bill during the 9th National Assembly said that in adopting risk-based capital adequacy template, it took cognisance of the need to consider insurance risk, market risk, credit risk and operational risk as well as the need to apply such capital charges on assets and liabilities.
The association hinged its position on a 2013 report by the International Monetary Fund (IMF) that prescribed the risk-based capital model as the most suitable for the Nigerian insurance market.
It said at the time: “When the bill is eventually signed into law in line with this proposal, it will lay to rest the contentious issue of the definition of capital which has been a major point of the association’s engagements with the commission during the last recapitalisation exercise.
“We are convinced that the risk-based capital adequacy template is the best fit for the insurance industry in Nigeria, especially given the fact that the 2013 IMF Report has prescribed it and the commission agreed with it.”