From Kenneth Udeh, Abuja
A comprehensive legal framework for the regulation of all manner of insurance businesses in Nigeria in order to boost the sector sailed through the Senate on Thursday with the second reading of the Nigeria Insurance Industry Reform Bill, 2024 (SB 393) sponsored by Lagos East Senator, Tokunbo Abiru.
The bill also prescribes the need to review the penalties as the ones prescribed in the existing laws are inadequate and not deterrent enough.
Explaining to the Senate on the need to repeal the Insurance Act, Cap 117, LFN 2004, Abiru stated that the existing laws are obsolete and have hamstrung the industry’s potential to compete globally.
The laws under reference include: Insurance Act, 2003, Marine Insurance Act, Motor Vehicles (Third Party Insurance) Act, National Insurance Corporation of Nigeria Act, and Nigeria Reinsurance Corporation Act.
Inefficiencies experienced in the sector according to Abiru are due to the legal obsolescence of the laws.
“All these legislations, having surpassed a two-decade mark, lack provisions that can adequately address contemporary challenges and support growth and innovations within the industry,” Abiru said.
Speaking on the bill, Abiru decried the low penetration of insurance services in Nigeria, despite being one of the oldest industries in the nation’s financial services sector. He put the penetration rate at 0.5%, ranking 70th globally and 5th in Africa.
Urging his fellow lawmakers to support the bill, Abiru assured that the bill would be of general benefits to Nigerians, and the economy.
Other highlights of the proposed bill include its departure from the subsisting Insurance Act 2003.
Abiru said the major bottlenecks of the Insurance Act 2003 are that its provisions are too specific and prescriptive thereby making it rigid and not amenable to change to meet the dynamics of the insurance market.
His words: “The provisions in the Bill are crafted as framework legislation that provide for minimum or basic requirements while the details would be spelt out in regulations and policy directives.
“This arrangement allows for ease of amendments and adjustments and substantially limits the need for review of the law.
“It also allows for timely intervention for the purposes of protecting the policyholders and ensuring financial stability. This also will align the Nigerian insurance sector with international best practices.
Abiru added that the new Bill will be anchored on the following new areas; Consolidation of insurance legislations; Framework Law and Enforcement of Compulsory Insurance; Risk-based Capital & Revised Minimum Capital Requirement, Financial Inclusion, Third Party Motor Insurance, Corporate Governance and Market Conduct Regulation of Holding Companies, Increasing adoption of Technology, Strengthening of the Regulator, Consumer protection and Punishment for Violation.
According to Abiru a major of objective of the bill is the need for a robust legal and regulatory framework that will ensure that the Insurance sector contributes positively to the principal objective of the Financial System Strategy to make Nigeria Africa’s financial hub and one of the 20 largest economies in the world.
He said: “The need to fast track the process of managing weak companies as the existing legislation is not efficient for effective distress management.
The senators in their various contributions gave positive submissions in support of the bill stressing that the bill will revolutionize the insurance sector in Nigeria.
The bill was passed for second reading via voice votes presided over by the Deputy Senate President Barau Jibrin and was referred to the Senate Committee on Banking, Insurance and other Financial Institutions which is also chaired by Senator Abiru, the sponsor of the bill.