Financial services managers have advised insurance operators to implement the new risk-based supervisory model coming into effect in April this year to effectively position insurance companies to meet risk demand and exposure in the industry.
To them, insurers should move away from the compliance mentality and take proactive measures to implement the framework, as operators should not allow the regulators to be chasing them on this issue as a number of countries in the sub-saharan Africa with Kenya and Ghana leading in the maturity of implementation.
The National Insurance Commission (NAICOM) has announced with effect from April this year, the industry will transit to risk-based supervision model, as it will allow individual firms to grow their capital according to the volume of their businesses.
Senior Manager, Ernst Young, Advisory, Benson Uwheru, speaking during the presentation of the report “Waves of Change: Revisited 2016” of in Lagos, said the Nigerian insurance companies are now implementing global best practices risk-based supervision. It is really a model that will help us to effectively position insurance companies to meet risk demand and exposure in the industry.
According to him, insurance companies should be proactive and move away from the compliance mentality, operators should not wait for the commission to force the issue on them, they should be ahead of regulation.
The report which was witnessed by a number insurance CEO, said when we talk about capacity, it has always been an issue, capacity both from the regulatory and operators’ perspectives, but we know that for the regulators to want to implement risk-based supervision, we are very much aware that a lot of capacity building has taken place, NAICOM has significantly partner with consultants to prepare them for this project and I think the onus lies on the insurance companies to prepare for that supervision which simply mean that they would be assessed based on their risk profile. I think it is long over due, it is a welcome development, it is healthy for the industry.
The East and Central Insurance and Actuarial Advisory Leader, EY Africa, Nairobi, Kenya, Sujay Shah, said, it is an interesting process that will be introduced in April 2016 in the Nigerian insurance market, they will get more information complying with the risk-based regulation, for example, when we are talking about assets charged to liability, this need to be reviewed overtime based on the local Nigerian insurance market.
He said three overarching themes emerged in terms of the kind of regulatory framework the respondents would like to see. The ideal framework is one that enables trust, inclusion and knowledge. The development and implementation of risk-based supervision, risk-based capital requirements, and minimum capital requirements are a few of the important steps in building trust. Markets are in various stages of progress and maturity in these areas.
At the same time, various consumer education initiatives and regulations around Takaful and micro-insurance products are promoting inclusion and knowledge.
Shah, who presented the report said “Since 2010, the sub-saharan economies have consistently ranked among the world’s fastest growing; the World Bank predicts 4.6 per cent regional GDP growth in 2015, rising to 5.1 per cent by 2017. And at least five African countries now rank among the 10 fastest growing national economies in annual World Bank reports. In fact, the World Bank now consider Nigeria the continents largest economy, ahead even of South Afria, Ghana and Zambia have also moved into middle-income status. These shifts suggest greater potential for insurance sales across Africa than previously estimated.
Foreign investors are recognizing these changing dynamics. Over the past decades, private investors have committed total funds to Africa than foreign governments or international aid agencies as “official” assistance. Foreign direct investment (FDI) in the sub-saharan region grew by nearly 50 per cent to USS61 billion in 2014, making the region the fastest growing in the world for FDI.
According to the report, though South Africa remains the top destination for FDI, total FDI into the country actually declined by 15 per cent last year, demonstrating that foreign investors are diversifying more broadly into other sub-saharan economies.
Rising incomes and growing affluence make insurance purchases more likely as consumer spending on discretionary items, such as cars, smart mobile phones and health care expands.
Source: Guardian News