The National Insurance Commission (NAICOM), the industry regulator, has revealed plans to sanction operators that contravene the local content policy by ceding businesses offshore, without fully utilising local capacities in this 2017.
The Commission revealed this in a circular titled: “Utilisation of In-Country Capacities of Nigerian Insurers, Reinsurers and Pool Prior to Foreign Facultative Reinsurance,” dated December 22, 2016, and signed by Director, Authorisation and Policy, NAICOM, Pius Agboola.
The circular read in part, “The attention of the Commission has been drawn to recent practices in which insurance practitioners fail, neglect or refuse to consider and fully utilise relevant in-country capacities of insurance/reinsurance institutions such as pools, reinsurers and other approved local/recognised insurance capacities, prior to applying for approval to cede certain proportion of some risks offshore.
According to Agboola, “In some situations where the pools, insurers or reinsurers are offered participation, the institutions are either offered minimal proportion below their capacity or informally restricted and/or compelled to accept lower than their respective capacities for the purpose of justifying cession of the risks offshore.”
He added that “this unethical practice which undermines our collective resolve to ensure full utilisation of available in-country capacity in line with domestication and the local content policy contravenes extant insurance laws and regulations and shall therefore not be tolerated henceforth.
“The Commission has observed that some Insurance Institutions have inappropriately arrogated to themselves the authority to unilaterally exclude some insurers over alleged outstanding claims. It has therefore become imperative to remind all insurance institutions that they are required to report any alleged non-settlement of claims to the statutory grievance/complaint redress mechanisms (the Commission’s Complaint Bureau) for appropriate action prior to determination of their participation (Refer to our Circular NAICOM/CB/MDM/001 of 13th January 2015).
“We hereby restate that: All insurance institutions are required to ensure that Nigerian Insurers, Reinsurers and Pools (in the Commission’s records) must be offered and allowed to willingly decide the proportion of the risk they wish to accept (subject to their respective capacities), before any application for approval for offshore placement of the excess. Secondly, all recognized reinsurance treaties/arrangements and additional capacities offered by Local Reinsurers/Pools must be fully utilized before excess consideration for offshore placements. Thirdly, all off-the-system or informal directives to co-insurers, local reinsurers and pools to accept lower than their desired available capacities are hereby prohibited. Please ensure strict compliance as we would not tolerate any breach of these directives. Failure to do so will henceforth result in the imposition of appropriate regulatory actions as well as declinature/ rejection of such requests,” he assured.