By Chiamaka Ajeamo and Joseph Inokotong
The National Insurance Commission (NAICOM), in its commitment to boost productivity, improve public trust and guarantee a solid and safe sector in line with global best practices, has unveiled a three-year strategic plan (2021-2023) to ensure its goals are accomplished.
According to NAICOM, the plan which aims to transform the industry within the period of execution has its foundation on five solid pillars namely entrenching effective and efficient service delivery; ensuring safe, sound and stable insurance sector; adequately protecting policyholders and public interest; improving trust and confidence in the insurance sector; encouraging innovation, and promotion of insurance market development.
In addition, the plan intend to ensure a complete trust on the Commission via the promotion of insurance market development towards refining the scope of internal rule-base to its new risk-based supervision approach through its new integrated governance management system. Commissioner of Insurance and Chief Executive Officer, NAICOM, Sunday Thomas, while speaking at a seminar in Lagos tagged: ‘NAICOM Corporate Strategic Plan 2021 to 2023: Goals, Objectives and Key Deliverables’, organised by the Commission for Insurance Journalists, explained that the plan was birthed due to the unexpected events such as; COVID-19 pandemic, the #EndSARS protests, and the rise in kidnappings, armed banditry, communal tensions and conflicts, occurring since the development of itslast strategic plan implemented between 2016 – 2020, and have greatly impacted the activities and initiatives of the Commission.
According to Thomas, these events have ushered in the new normal, altering the status quo on how the industry conducts its business going forward and the corresponding regulatory response.
He further noted that these unforeseen events had also formed the need to prepare the workforce for the new work order, protection of policyholders, improving human capital, leveraging on technology and creating alternative channels of insurance distribution to stimulate productivity; adding that NAICOM would ensure periodic review and performance monitoring of the plan within its lifespan bearing in mind current pandemic.
Thomas disclosed that the three-year plan also has the goal of positioning the Commission as a global competitive regulator whose functions are compliant with global best practices and whose supervisory roles will project and promote strong insurance institutions sound enough to shoulder the risks of other economic operators to meet the needs of the insuring public
Liquidity/capitalisation of firms
According to NAICOM, the take-off point of the plan will be to ensure all operating companies reposition on liquidity status. The Commission disclosed that it will regulate this by ensuring that all firms reorganise their balance sheets such that those that presently depend on assets that cannot easily be converted to cash can restructure their operations to rely on cash flow instead of fixed assets.
The NAICOM boss stated it has begun this step by going through the expert advice of insurance firm owners who have in the past surpassed the highest level of investment in real estate.
Giving instances, the Commission said; it discovered that firms that exceeded the maximum level of investment in real estate are currently facing cash problems as they could not easily turn their assets into cash to keep their business running effectively. In the light of the above, it said it is stringently guiding operators to ensure that going forward none surpasses the 25 per cent maximum investment in the real estate sector.
Commenting on the development, NAICOM Director of Supervision, Thompson Barineka, noted that most of the firms currently tagged as weak are not actually weak in reality but are tagged so because of the value of assets they have majorly in the real estate sector; which is fixed assets. He disclosed that the main problem is the inability of the firms to swiftly turn those assets into cash and continue to fulfil their responsibilities to the insuring public. As regards capitalisation, Thomas revealed that firms with low capital base and solvency margins will struggle as soon as the Commission starts the Risk-Based Supervision (RBS) because operators risk acquisition will be determined by their capital status and capacity to settle claims.
“What we are doing beyond what has been done is that Risk-Based Supervision (RBS) has become a reality. It has been in the works for a long time and we have been anticipating its commencement. I am happy to announce to you that all that is needed to be done with respect to the RBS has been so substantially done. In one or two months, the first set of risk-based supervision in the market will take off. The relevant persons have been trained, necessary skills have been acquired, instruments that will enable implementation have been developed”, the Commissioner expressed.
For the Commission, areas of growth that need to be invested into include life business, oil and gas.
The NAICOM boss stated that it was in the light of the above discovery, the Commission decided to boost the capacity of life operators in the sector by licensing some life companies.
Thomas revealed his administration issued licenses to five insurance firms in the category of three life insurance, one general insurance and one reinsurance operator; noting that the last reinsurance firm licensed in the country was 32 years ago while the last life insurance firm was licensed ten years ago. He added that the growing pension fund assets which stands in excess of N12 trillion will partly be invested into the life insurance business through annuity following the signed guidelines between the Commission and the National Pension Commission (PenCom) on group life insurance and life annuity business; pointing out that; N9.2 billion has been set aside for 2021 to 2022 financial year for the group life of Federal Government agencies.
“Why South Africa is dominating insurance market in Africa is because of its strength in life insurance business. Today in Nigeria, the contributory pension asset is in the neighbourhood of over N12 trillion, it is expected that some of these funds will find their ways to the insurance sector.” On Oil and Gas, the Commissioner said NAICOM has a committee set-up which is collaborating with the Nigerian Content Development and Monitoring Board (NCDMB) to come up with a guideline that will ensure the National content Act on oil and gas is executed hence; the insurance industry would soon experience a boost in the oil and gas business.
Thomas was optimistic that the guideline will seal the leakages and restore lost hopes which hitherto had made it difficult for the local content to make a mark for Nigerian participation.
He assured that both the life operations and non-life businesses of the sector will witness tremendous expansion.
On Compulsory insurance, he said the Commission is engaging governments especially, the state government on the benefits of insurance. “To this effect, we are committed, specifically to the Federal Government agencies, in getting the concurrence of the Minister of the Federal Capital Territory, Musa Bello for a guideline that will make it mandatory for agencies to make adequate provision for the insurances”.
Digitalisation of industry
The Head, Information Technology Department of NAICOM, Abiodun Aribike, said in line with the Commission’s agenda to digitalise the industry, it is currently employing information technology to drive the supervision, regulation and governance of insurance business in Nigeria, explaining that the NAICOM portal is designed to provide a direct interface with the industry to ensure greater accountability, increase operational efficiency and transparency in the sector.