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•NASS, Govs pledge support
By Henry Uche, [email protected]
Recently, financial experts, corporate leaders, captains of industry, development economists and political leaders across sectors converged on Abuja for the 2023 National Insurance Conference to brainstorm on ways to boost insurance business.
The two-day confab was a marathon session of cross- pollination and fertilisation of ideas by men and women who are poised to see that Nigeria comes out of its current state of economic quagmire, by constantly beaming searchlight in every sector of the economy.
One thing that worries most Nigerian is the incessant and indiscriminate house collapses across the country especially in Lagos state.
Reports from Building Collapse Prevention Guild on building collapses is not only alarming but heartbreaking, hence the need to declare a state of emergency in the sector.
With the theme “Redefining Safety: Insurance Solution for Public Building and Building Under Construction” the presence of the creme de la creme of insurance practitioners at the confab showed deep concern about the state of the sector and the desire of stakeholders to proffer solutions out of the menace.
The sector under review no doubt is still struggling to stand competitively against its peers in Africa and other parts of the world.
Currently, the penetration rate and insurance contribution to real GDP is still less than four percent (4 per cent) combined. Some identifiable problems of insurance sector include slow penetration, low awareness campaign, negative perception, dearth of confidence and trust among others.
Speaking on the aforementioned theme, the chairman of Heirs Holdings & UBA Group, Tony Elumelu, came out bold a strategy/model which if adopted would reposition the sector.
Elumelu challenged the Federal Government, the Ministry of Finance and the National Insurance Commission to adopt a recapitalisation strategy- a model the banking sector adopted in 2005 and 2019, to reposition the indutry.
Though recapitalisation excercise has negative and positive sides to it, the long- run benefits are enormous; to say the least.
Elumelu, proposed N30billion capital base for general insurance, N20billion for Life insurance and N50billion for composite Insurance.
This according to him would enable the operators meet current market realities (challenges and prospects to compete favourably in the dynamic and troubled global business environment.
The founder of Tony Elumelu Foundation equally proposed N1billion capital base for insurance brokers, adding that there was need to review the distinction between Life and non- life insurance authorisation and Licenses, hence NAICOM should via regulation, shape and enforce compliance. Highlighting the current capital requirement for Life insurance (N8billion) and N10billion for general insurance, he said NAICOM should shift focus from approving advertisements to concentrating on more significant aspects of regulation. He argued that the Commission should allocate its time and resources to more catalytic actions.
Elumelu pointed out that with the devaluation of the naira, and capital requirements of $8m and $10m for life and general insurance, respectively, in Nigeria, he asked, “How can an industry intended to ‘insure’ and mitigate the risks associated with the economic growth of a country have such low capital requirements?
“Let me be clear: recapitalisation is not about increasing the barriers to entry into the industry, gatekeeping is not the objective here, however, we must ensure that the sector has the financial muscle and backbone to handle more complex insurance transactions while extending its reach. That is the only way the industry can scale and expand operations out of Nigeria and into Africa.”
The UBA boss who called for discipline by all stakeholders moreover urged Nigerian Insurers Association (NIA) to work with NAICOM to make sound policies, while proposing that all insurers in the country should contribute 0.5 per cent of their total revenue to drive industry awareness over the next five years.
The philanthropist advised the Commission to allow brilliant minds to come into the insurance sector and limit years of experience only to technical areas, as well open the insurance sector for young and innovative minds.
“With the right enabling environment, we would see a transformation of the Nigerian insurance sector.
Insurance sector practitioners must act in ways and manner to attract young people into the profession.
“We need a mindset change in the industry. We need to increase the capacity in the sector. We need a younger and more agile workforce. We have so many young people, but the insurance sector is not attractive to them like the way banking, oil and gas, fast moving consumer goods, IT/Technology, creative areas like Nollywood and other sectors are. The youth have the energy, ideas and the creativity to take the industry to the next level. See what has happened in the banking, telco, creative sectors of our economy. These can also be replicated in the in the insurance sector,” he maintained.
Elumelu added that insurance must be common right of every Nigerian citizen, even as he lamented that the country has less than 2 per cent insurance penetration, with its over 200 million people, struggling to survive, amidst the harshest economic realities.
We must re-assess and eliminate the stifling policies, roadblocks, and complacency in the insurance system, to encourage innovation and provide our people with simple and accessible insurance, not as an option, but as a fundamental right to secure their future”.
NASS response
In support of the propositions of experts, the Speaker of the House of Representatives, Tajudeen Abbas, represented by Chairman, House C’ttee on Insurance & Actuarial Matters -who also represents Chibok/Damboa/Gwoza Federal Constituency of Borno State, Ahmadu Jaha, urged NAICOM to work with State governors to see that risk management and insurance is incorporated and domesticated into every political decision making, policies, budget and programmes of the government and take proactive actions where necessary to ensure compliance no matter whose ox is gored. “NAICOM should work with state governors to ensure risk management and insurance are incorporated into everything they do, it’s very important” he implored.
Similarly, the Senate President, Godswill Akpabio, represented by Senate Minority Whip, Danlington Nwakocha, who expressed sadness over perennial building collapse in Nigeria, opined that there is need to amend certain provisions of Insurance Act like Sections 64 (1, 3), and 65 (1) which spell out rules for erection of building and penalties against defaulters. “There is need to increase penalty measures against defaulters. Moreover, we need to explore innovative solutions to promote insurance and risk management. There is also need for inter- governmental agency taskforce to enforce insurance compliance across board,” he added.
Governors response
In line with his transformative agenda, the Enugu state governor, Mr. Peter Mbah, vowed that all projects under his watch in the state must have insurance cover, while urging “NAICOM to work with governor across the country, to ensure that all projects are insured.
Similarly, Lagos State governor, Babajide Sanwu-Olu, represented by the state Commissioner of Finance, Mr Rabiu Olowo Onaolapo, assured that the state would fully comply with every laws and regulations regarding public building and construction for the safety of all. “We’re in compliance with relevant laws regarding public building and constructions and we shall not tolerate nor compromise with anyone, because life is precious to us,” he averred.
Federal Ministry of Finance
In a sad note, the minister of Finance, Wale Edun, who recounted the losses of ENDSARS, said N11bn was paid for properties under insurance cover that were destroyed during the protests, saying “It’s important we all across government agencies and parastatals, work together to see that insurance in promoted and accepted by all Nigerians.”
In a swift response, the President /Chairman of Governing Board, Risk Managers Society of Nigeria (RIMSON), Mr. Gus Wiggle, totally disagreed with Elumelu’s proposed strategy, saying that the insurance sector need to be redirected to the right direction.
Wiggle who was the former Chairman of Nigerian Insurers Association (NIA), said, “I respectfully want to disagree with Mr. Elumelu on the need to increase the capitalization.
“The business is gradually moving away from regulated recapitalization direction but Risk-based Capital (RBC) under the Risk-based Supervision (RBS) system.
Risk-based capital (RBC) is a method of measuring the minimum amount of capital that an insurance company needs to operate. RBC is based on the size and risk profile of the insurer, and it aims to ensure that the insurer has enough capital to withstand losses and protect policyholders”
He maintained that the #3b or #8b as we have it presently for non-life businesses are good enough for our market as minimum threshold, noting that there are companies that do not need such huge capital to do their business but with such humongous capital and with a limited space to invest, there will be so much ideal funds and investors may not have value for their investments.
“When you have such huge capital, it will be difficult to differentiate the boys from the men as both the big boys and not so big will be struggling for the same business, after all, they all have the same capital. It is high time; we start to have specialist insurance company like in the time of old.
“If I may take you back memory lane, NEM Insurance was a solely motor insurance company, UNIC was well known for Marine Insurance, Law Union & Rock for Engineering Insurance etc. We always do things the old way and never want progressive change” he bemoaned.
For Obinna Chilekezi, insurance researcher and consultant, the world is talking about risk based capitalisation and not fixed capital base, saying, “Can someone tell me the capital base of an insurance company in UK or in Kenya. Have we ask what is the role of reinsurance on insurance business? Ask anyone if he/she would as an investor be happy if their investments in an insurance company is used just for claims payment”
Chilekezi stressed that the dynamics of insurance is quite different from that of banking, besides what is obtainable now based on solvency 1 and 2 is that coys should be capitalized according to their risks exposure. “No one is talking of a fixed capital base. This alse entails that the regulatory framework should be risk based supervision. Which would demand a lot of involvement by the regulator. Under this regime a company can decide to sell only a class and capitalize to that tune. Also we have to note that reinsurance plays important role in enhancing the capacity of an insurance company”
He added that it was not just a matter of capital as outsiders could see it, but the ability of an insurance company to accept and retain risks which could be enhanced by its reinsurance treaty. “Mr Elumelu should know that it is from the premiums collected that claims are paid and not from capital. This may be strange to non- insurance professionals,” he submitted.
Meanwhile, NAICOM is yet to react on this as stakeholders in the industry eagerly await Mr Thomas’ position within the shortest possible time.
