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Experts predict tighter regulatory regime in insurance industry

By on August 10, 2015

Industry experts have predicted a tough regulatory regime in the insurance sector of the economy following the appointment of Alhaji Mohammed Kari as the new Commissioner for Insurance (CFI) and Chief Executive of the National Insurance Commission (NAICOM).

Speaking in an interview with THISDAY, an industry expert who is the Managing Director, Forbes Integrated Company Limited, a private equity company with major focus on mergers and acquisitions, Mr. Samson Davis said Kari’s emergence as the new CFI was “sad news for the insurance industry.”

This, according to him, was because the NAICOM boss would be a pain in the neck of industry practitioners who wouldn’t expect any change in policies to suit their interests.

Describing him as “strong-willed”, he said Kari is seen as a man who believes in due process as against the “man-know-man” approach, which was hitherto prevalent in the industry.

He said the new CFI has manifested his change mantra shortly after assuming office by among other things, ensuring that insurance companies comply with monthly returns or pay a fine of N5,000 daily while brokers now have to file all the appropriate returns before getting their annual NAICOM clearance.

Davis said: “Even though he had some level of authority to introduce some of the regulatory changes while he was still deputy CFI, the 10-year tenure policy that could not be implemented by his predecessor was a reason most industry players never wanted a Kari to succeed him.”

According to him, the recent 10-year tenure proposal for insurance chief executives was rumoured to be the brainchild of Kari. He also predicted an increase in the capital base of insurance firms.

He said: “A general insurance company has N3 billion while life assurance companies have N2 billion; only 10 per cent of that capital base is secured with NAICOM in the Central Bank of Nigeria (CBN) custody. In the event of claims, most of the 90 per cent incomes are in fixed assets with no sufficient liquidity to pay claims.”

“This has made it impossible for a single insurance company to even insure the cheapest aircraft not to talk of an airline. The insurance companies are forced to form a pool to underwrite the aviation industry”, he added.

Davis said insurance companies should be directed to face their core insurance businesses and divest from non-insurance subsidiaries. According to him,

“These are the reasons why most insurance companies never have enough liquidity to pay the insured.”

Also in an interview with THISDAY, President, Association of Professional and Practicing Insurance Brokers of Nigeria (APPIBN), Mr. Delly Ajufo described Kari’s appointment as a welcome development for the insurance sector.

He said: “I don’t think so and we should not expect stricter regulation.

Insurance industry in Nigeria is the most regulated industry, not just insurance but the industry generally in the whole world. Elsewhere, insurance companies own banks, hotels, and invest in pensions and other ventures. Here in Nigeria, we merely collect meager premium and do no serious insurance placements.”