The National Insurance Commission (NAICOM) has exposed the draft roadmap of the industry’s risk base supervision for insurance operators to make their recommendations.
The draft was unveiled by the Commissioner for Insurance Mohammed Kari, at the Insurers Committee meeting in Lagos. He gave the operator’s one-month period to critically examine the draft and inject their contributions.
Risk base supervision would enable insurance undertake risks inline with their financial capability.
According to Kari, the exercise would lead to consolidation. He noted that consolidation is inevitable, stressing that there are many players in the industry who do not add value to the services they provide. He maintained that the exercise would change such attitude and position operators for effective permanent.
“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. 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,” he said.