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The National Insurance Commission (NAICOM) has warned insurance companies that raising their capital does not guarantee financial stability, urging directors to strengthen corporate governance, risk management and accountability to protect policyholders.
The Commissioner for Insurance and Chief Executive Officer of NAICOM, Olusegun Omosehin, gave the warning at the 8th Annual Insurance Directors’ Conference in Lagos, saying the success of the recapitalisation exercise would depend on how companies manage and deploy their increased capital.
Speaking on the theme, *“Recapitalisation to Resilience: Leading the Risk-Based Capital (RBC) Era,”* Omosehin said the industry must move beyond meeting regulatory capital requirements and focus on building financially sound and well-managed businesses.
He said: “Recapitalisation is never the destination; it is the gateway to a more demanding phase; a phase that will be defined not by the size of capital alone, but by how that capital is governed, protected, deployed and aligned with risk.”
He challenged company directors to take greater responsibility for their institutions, insisting that their duties go beyond attending board meetings and protecting shareholders’ interests.
According to him, directors must question management decisions, examine business strategies and ensure that companies operate within their financial capacity and approved risk limits.
“A well-capitalised institution is not necessarily a resilient institution. Experience across financial markets has shown that institutions with substantial financial resources can still fail due to poor governance, weak internal controls, ineffective risk management, inappropriate investments and inadequate board oversight,” he said.
Omosehin said insurance companies must guard against losing their capital through poor underwriting, excessive operating costs, risky investments and uncontrolled business expansion.
He also urged boards to pay closer attention to the risks associated with insurance claims, reinsurance arrangements, investments, liquidity, technology and daily operations.
The commissioner noted that changing technology, consumer behaviour and emerging risks were reshaping the insurance business, requiring companies to improve their services and develop products that meet customers’ needs.
He said policyholders now expect greater transparency, faster service, affordable products and better digital services, but, most importantly, they want assurance that insurers will pay genuine claims when due. Omosehin warned that NAICOM would place greater emphasis on the quality of companies’ capital, financial reports, risk management systems and ability to meet their obligations. He added that companies must submit accurate and timely financial information to the commission, while strengthening internal audit, compliance and risk management departments.
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The regulator also stressed that directors and senior executives must be appointed based on competence, experience, character and professional ability rather than personal relationships or influence.
He said board members must have the necessary knowledge of insurance, finance, law, investments, technology and risk management to effectively oversee increasingly complex businesses.
Omosehin further warned that the interests of shareholders must not override the protection of policyholders or encourage companies to pursue risky and unsustainable growth.
He said the recapitalisation exercise should translate into stronger underwriting capacity, improved claims payment, better services and greater public confidence in the insurance industry.
According to him, a stronger insurance sector would also help finance infrastructure, energy, manufacturing, agriculture and other important sectors of the economy.
He said increased financial capacity could enable Nigerian insurers to retain more risks locally, reduce dependence on foreign insurance markets, attract long-term investments and expand access to insurance.
However, he warned that these benefits would not come automatically without improved governance, innovation and prompt settlement of genuine claims.
“The public does not measure the strength of an insurance company by the size of its capital alone. Ultimately, policyholders judge institutions by their willingness and ability to honour their contractual obligations.
“This makes claims settlement one of the most important determinants of public confidence in the industry. I urge boards to place policyholder protection at the centre of their institutional strategies,” he said.
The commissioner said the decisions taken by company directors would determine whether the gains of recapitalisation would lead to lasting improvements in the industry’s performance, competitiveness and public trust.
