Concerned stakeholders in the nation’s insurance market, worried by the current face-off, have appealed to the National Insurance Commission (NAICOM) and market operators to co-operate in other to find solution to the recapitalization impasse.
According to the observers, the resolution of the recapitalization challenges is not only necessary to reduce further damage to the image of the industry, but also expose the Nigerian insurance market bad side to the international insurance and reinsurance partners as unstable market.
For instance, a chieftain of the market who spoke to AssurPen Online on condition of anonymity said that since there is a general agreement in the industry for recapitalization based on the 2013 IMF Report on the Nigerian Insurance industry which prescribed Risk-Based Capital model as most suitable for the Nigerian Insurance market.
According to him, “The current drive of government to make Nigeria a financial and investment hub of Africa throws up a challenge to the Nigerian insurance Industry. To enable the industry to provide the needed insurance protection to the prospective investors and play the role of the stronghold of economic development.
“Insurance and reinsurance firms should work towards increased capital base beyond the two billion, (2 billion), three billion (N3 billion), and ten billion (N10 billion) for Insurers and reinsurers”, he said.
However, the Nigerian Insurers Association (NIA) have advocated introduction of Risk Based Capital in the Consolidated Insurance Bill 2020, currently at the National Assembly.
They described this model as the right capital model for the insurance industry in a bid to emulate other developed economies, noting that, adoption of this model signals that the Nigerian Insurance market now operates with the International best practice. This, they believe, will equally reposition the industry for accelerated growth and development.
Making a presentation at the 2-day public hearing on Consolidated Insurance Bill 2020 organised by the house of representatives committee on Insurance and Actuarial matters in Abuja recently, the chairman of the association, Mr. Ganiyu Musa, stated that, in adopting Risk based Capital adequacy template, NIA took cognizance of the need to consider insurance risk, market risk, credit risk, and operational risk as well as the need to apply such capital charges on assets and liabilities, including all capital resources.
He hinged the association’s position on the 2013 IMF Report on the Nigerian Insurance Industry which prescribed the risk based capital model as most suitable for the Nigerian Insurance market.
According to him, the IMF report was duly acknowledged and admitted by the National Insurance Commission (NAICOM) as the right capital framework for the market as it seeks to limit the capital required by operators to the level of risks they can carry.
When the bill is eventually signed into law in line with this proposal, he said, it will lay to rest, the contentious issue of the definition of capital which has been a major point of the association’s engagements with the regulatory body during the ongoing recapitalisation exercise.
“We are convinced that risk based capital adequacy template is the best fit for the insurance industry in Nigeria especially given the fact that the 2013 IMF Report has prescribed it and the commission agreed to it.” he stated.
The director-general of the association, Mrs. Yetunde Ilori, emphasised that risk based capital is the ideal model if the insurance industry is to attract the right investment and increase insurance contribution to the Gross Domestic Product (GDP).
She believes that this model will make the insurance industry in Nigeria attractive to investors and save about N77 billion payout as cost of recapitalisation.