Matthew Otoijagha
With the cancellation of the Tier Based Minimum Solvency Capital (TBMSC) framework by the National Insurance Commission (NAICOM) late in 2018, the capital base of the industry remains the same, meaning that, Non-Life Insurance Firms are to continue to operate with a minimum of N3 billion capitalization; Life Insurance Operators to maintain N2 billion and Composite Insurers are to maintain N5 billion minimum capital base, a base to which they will conduct their respective businesses in 2019.
If the recapitalization exercise had gone through, market analysts who spoke at the National Association of Insurance and Pension Correspondents (NAIPCO) workshop in Lagos recently, said, it would have increased the capitalization of insurance industry by at least 300 per cent, which would have allowed insurers in the country to retain some of the huge insurance businesses being taken abroad.
While calling on his colleagues in the business of insurance to shore up their capital base in the new year, irrespective of the cancellation of the recapitalization exercise, the President, Chartered Insurance Institute of Nigeria (CIIN) who is also the Managing Director/CEO, Consolidated Hallmark Insurance Plc., Mr. Eddie Efekoha, said, most insurance companies will still lose businesses they used to underwrite as policyholders seemed poised to transfer their risks to underwriting firms with strong capital base.
He stated that there is a particular transaction in Exxon Mobil for several years that never respected the N3 billion capitalizations, adding that operators whose capital was within this minimum were excluded from the business.
He noted that, recently, he was told of a broker, who said his client had informed him not to place risks with any underwriting firm with less than N9 billion as proposed in the cancelled TBMSC policy. Efekoha posited that with such developments, it is now immaterial whether the industry regulator withdraws the TBMSC policy, adding that the policy has opened the eyes of insurance consumers.
He said: “What I heard from our office recently was that there is a broker that said that my client has already seen that N9 billion is what is required, so please go and shore up. It is immaterial whether the commission has withdrawn from the TBMSC or not. Of course, we are all here in this market, there is a particular transaction in Exxon Mobil for several years that never respected the N3 billion capitalizations and to that extent, some of us whose capital was not up to that minimum were excluded.”
Rate-cutting is expected to continue in Insurance Industry in 2019 as insurers scramble for businesses, especially, in the formal sector base. A development that is hurting insurance industry in terms of premium income, experts said, risk-cutting is a regrettable act that must be addressed to increase insurance contribution to the nation’s Gross Domestic Product (GDP).
According to the Deputy Commissioner for Insurance, Mr. Sunday Thomas, “There was a point in this market when 10 per cent for comprehensive insurance was sacrosanct, but later, it came down to five per cent and that became the standard. But you and I also know that there was a point that some operators were charging as low as one per cent.
“Also, there was a point that 3rd party was N5, 000. You and I know that it came to a point where people were charging N1, 000 and the market was producing N200 million premium incomes from this business. If they decide to charge N5000, what is the market likely to produce?”
This challenge, he said, must be addressed by insurers to increase the stake of the industry to pay genuine claims as and when due, noting that, when a risk is underpriced, it affects the ability to promptly pay claims.
The Chairman, Nigerian Insurers Association(NIA), Tope Smart, said, the nation’s economy has been projected to expand by about 2.5 per cent in 2019, promising that insurance industry will take advantage of this expected growth.
“We have figures of the growth of about 20 per cent when you compare the figure for 2017 and 2018 and I hope 2019 will better. By the time we have the end of the year result; we will be having what I call a very positive result.
‘‘The industry will continue to prioritize claims settlement and both regulator and operators are working together to put insurance companies on their toes to pay genuine claims through NIA and NAICOM complaint bureaus,” Smart, who is also the Managing Director/CEO, NEM Insurance PLC, pointed out.