THE inability of underwriting firms operating in the insurance industry to submit quarterly returns to the regulatory authorities may be linked to the low solvency gaps which are recurring features in their activities for more four consecutive years.
Industry sources identified this as a serious challenge, as a result, insurance operators are finding it increasingly difficult to meet quarterly returns to the National Insurance Commission (NAICOM) and the Nigerian Stock Exchange (NSE). Besides, the 2012 compliant accounts of the International Financial Reporting Standards (IFRS) set by government for the insurance industry may also have affected the ability of insurers and brokerage entities to submit yearly audited financial statement on time.
For instance, the industry regulator (NAICOM) in a notice posted on its official website indicated that between 13the and 21st October this year, only eight insurance companies submitted their 2015 third quarter returns.
Besides, 50 underwriting and reinsurance firms in the industry are yet to submit their 2015 third quarter yearly accounts and returns to the commission.
According to the commission, six other underwriting firms are yet to submit their second quarter returns, while six insurance companies have failed to submit first quarter returns to the regulators.
A source at the commission who expressed worry on the inability of underwriting firms to submit their returns explained that from the audited financial of nearly a dozen insurance companies, solvency caps are recurring features of their activities for as much as three consecutive years. According to him, appropriate regulation should have resulted in either suspension of the operating license and possibly withdrawal. The commission shall therefore have zero tolerance for solvency gaps in the ensuring year in the interest of the insuring public and for the avoidance of exposure of NAICOM to regulatory risk.
According to him, against the backdrop f massive investment losses following the capital market crash of 2009/2010, the capital base of a number of underwriting companies has dropped remarkably, which has invariably affected their operations in the industry.
An industry chieftain, however, said that the ability of commission to sanction some of the defaulting companies may be limited by the Insurance Act 2003, adding that no matter the decision taken by the commission, it has to be approved by the Minister of State for finance. According to him, while other regulatory authorities in the financial services industry are empowered by law to deal with infractions in their financial sub-sectors without recourse to the government agencies, the power of the commission to deal with similar cases by operators in the insurance industry is limited by the Insurance Act 2003.
He explained that failure of operators to meet the deadline set by the law, defaulters are expected to pay a fine of N5,000 daily which the commission had been relying upon to sanction defaulters in the industry.
source: Guardian News