The National Insurance Commission (NAICOM) has exposed the draft roadmap of the industry’s Risk-Base Supervision (RBS) for insurance operators to make their recommendations.
It is worthy of note that RBS is gradually becoming the dominant approach to regulatory supervision of financial institutions around the world. It is a comprehensive, formally structured system that assesses risks within the financial system, giving priority to the resolution of those risks.
In Nigeria, RBS would enable insurance companies only undertake risks within which their financial capability can carry in case of any loss.
Mohammed Kari, Commissioner for Insurance, NAICOM, while unveiling the draft at the Insurers Committee meeting in Lagos over the weekend gave the operators one month period to critically examine the draft and inject their contributions.
The Commissioner noted that the exercise would lead to consolidation while others would take the option of microinsurance.
He stressed that consolidation is inevitable, noting that there are many players in the industry who do not add value to the services they provide, adding that the exercise would change such attitude and position operators for effective permanent.
In his word, “Consolidation does not mean just an additional capital. It could be redefining and identifying the type of insurance business you want to operate. For example, you do not have as much capital as company B, you would operate within the confines of your capital.
“Today, we have capital as the only bases for operation and if you meet the minimum capital you can operate.
“Our legislation had structured the industry into life, general and miscellaneous. So, if you are licenced to do general, it means that with N3 billion you can attempt to insure petroleum refinery or you can claim the right to insure an Airline, which is not right if you look at the foundation of insurance.
“This is because, to be able to hold a risk, you must have enough asset base to cover the risk. So, risk base is being able to identify what is your financial capability. If you financial capability does not guarantee you to insure oil refinery or airline, you would not be allowed to do so.
“Your financial ability may be to insure a Keke NAPEP, then, you would be a specialist in Keke NAPEP insurance. That is what risk based is going to be. It is going to first of all require that we review and see whether the minimum capital requirement is adequate.
“If it is not, we would require additional capital to meet that minimum. But if it is okay, we would just require the classification of companies’ assets plus the extra needed to get into the class of business one wants to undertake.”
Meanwhile, the Nigeria Insurers Association (NIA) will on November 8, 2016, organise a retreat for its members on Risk-Base Supervision (RBS) with three facilitators coming from South Africa so as to give the operators better knowledge of the scheme.