Follow Us on Google
By Henry Uche [email protected]
Amidst Nigeria’s hostile socio-economic and political environment, directors of insurance institutions in Nigeria have been charged to pay serious attention to Environmental, Social and Governance (ESG) principles as they pilot the affairs of their companies in the volatile business environment.
The Commissioner for Insurance, Nigeria, National Insurance Commission (NAICOM), Mr. Sunday Thomas, who made this charge at 2022 Insurance Directors’ Conference held in Lagos recently, said the insurance industry globally is continuously undergoing profound changes, and the disruption faced are not just digital but also harsh market conditions, informed demanding customers, innovative/ new market entrants as well as regulations.
The conference put together by the College of Insurance and Financial Management (CIFM) in partnership with NAICOM, was themed, “Transforming the Insurance Industry Through ESG Principles: Directors’ Roles” was specifically couched in view of the fact that the world has been going through rapid changes economically, socially, and environmentally, hence the need for Directors of insurance entities to speed up these developments to enable sustainability.
According to the Commissioner, with the requisite knowledge of ESG, insurance companies would be able to enhance the value of their companies and advert the danger of paying little or no attention to the impact of ESG in corporate survival and sustainability.
NAICOM boss said, “We must take cognisance of the fact that industrialisation and economic development have given rise to a wide spectrum of environmental externalities and social impacts bringing to the fore issues like board structure, shareholder rights, business ethics, risk management, incentives and executive compensation.
“Consequently, for businesses to continually develop, they must take into consideration the community in which they operate, ensure consistent value to customers, maintain the highest standards of governance and ethics, and mitigate its overall impact on the environment,”
Thomas maintained that sustainable finance which is the creation of economic value through the provision of financial services, now integrates ESG considerations for the lasting benefit of stakeholders and the society at large, noting that the objective was to achieve a balance in the pursuit of economic prosperity with environmental protection and social development.
He advised that, in the financial services industry, there is an increasing realization that sustainable practices have a positive potential to save costs, increase revenues, reduce risks, develop human capital and improve access to finance thus, while ignoring sustainability issues increases legal and reputational risk.
“ESG (Environment, Social, and Governance) are the three broad categories within which corporate sustainability is measured. It is pertinent to point out here that sustainability reporting is becoming more and more prevalent and sought for not just by governments through regulations, but also by stakeholders such as investors, consumers, and employees. Increasingly, companies all over the globe are incorporating sustainability in long-term development strategies as well as their day to day operations.”
He admonished insurance institutions to imbibe the principles of entrenching ESG issues in their decision-making process while they conduct of insurance businesses. “Working with other stakeholders to raise awareness on environmental, social and governance issues, manage risk and develop solutions in the conduct of insurance business in Nigeria is key. More so, working together with government at all levels, regulators and other key stakeholders to promote widespread action across society on environmental, social and governance issues in the insurance sector.
“We must demonstrate accountability and transparency by regularly disclosing publicly your progress in implementing these principles to relevant institutions responsible for; Monitoring and Evaluation of Compliance and Carrying out survey and research among stakeholders including (NAICOM, SEC, FRC)”
The insurance czar asserted that NAICOM also expects that insurance institutions take interest in pursuing: the developments of Green Products; improving operations geared towards energy efficiency; investment strategies; leveraging technologies; insuring people with disability; prioritise Corporate Social Responsibilities (CSR) and improving & complying with professional standards.
He reiterated NAICOM’s resolve to proactively respond to Climate changes like flood and disaster management; Monitoring Population Growth- Annuities Insurance Longevity; watch out for Green Technology- which includes Work on Electronic Submission of regulatory returns and renewal of licenses etc; investment and strategy support to Ethical Investment.
Other areas of top priority are: Green Products- Takaful & Microinsurance, implementation of Policies to encourage Insuring Crops and Weather Base Index, treating customers fairly- Prompt Claims payment as well as seeking synergy with development partners FSD Africa on BimaLab Project.
“Wherever there is a challenge, there is an opportunity. Thus, all the sources of disruptions can be harnessed to become a source of growth for insurers. While no one can predict exactly what insurance might look like in a decade, insurers can take several steps now to prepare for these changes.
“It is imperative that as an industry, we take precautionary measures by raising awareness within ourselves on the potential sustainability impacts of business transactions, and integrating these considerations into pre-emptive and holistic risk management processes.
“We encourage insurance companies to reduce their environmental footprint through their internal operations and business activities. As leaders of your respective companies, it is instructive that you take deliberate steps at reconciling long-term with short-term goals, global expansion with local objectives, workplace and community issues; all of which must be united, while not losing sight of the basic goals of profitable operations and increasing shareholder value.
“In other to facilitate economic prosperity, ensure environmental sustainability and social development, we must join forces with identified stakeholders to drive long term sustainable growth in the insurance sector for lasting benefits to all stakeholders.
“As an industry, we should draw on external knowledge and partnerships to keep pace with wider trends affecting not just the local but also the global insurance market. We must discover strategies to adapt and overcome further changes in the near future that may arise as a result of entrenching Economic, Social and Governance principles, as we forge ahead together in creating an enabling and sustainable environment through value creation,” he stressed.
Similarly, the Chairman, Governing Board of NAICOM, Dr. Abubakar Sani, reiterated the Commission’s seriousness over its circular imposing limit of tenure of Chief Executives of Insurance and Reinsurance Companies.
According to him, though the banking sector is ahead of insurance, howbeit, it’s never late to leapfrog sustainably.
