NAICOM transits to risk-based solvency model

… Minimum capital base in industry remains same

THE National Insurance Commission (NAICOM) has revised capitalization model in the insurance industry from compliance based to risk-based solvency supervision model.

This means that an insurance company intending to insure business in the peak risk portfolio such as oil, aviation and marine underwriting, must have sufficient financial resources to meet their obligations with respect to their insured.

However, the minimum capital base in the industry remains unchanged. For instance, insurance companies underwriting life business must maintain N2 billion capital base, N3 billion for non-life operators, N5 billion for composite insurance companies, while N10 billion is for re-insurance companies.

This was announced at the second industry consultative committee meeting held in Lagos between chief executives of insurance companies and officials of the commission, said the main objectives of the regulation are solvency to ensure that insurers have sufficient financial resources to meet thåeir obligations with respect to the insured.

The Group Managing Director, Continental Reinsurance Plc, and Chairman, Industry Sub-Committee, Prudential, Dr. Femi Oyetunji, who offered explanation on the new solvency model said the minimum capital base in the industry remained same, what this means is that any insurance company intending to underwrite peak risks and have adequate financial resources, must get the approval of the board of directors of the company to transit to the new solvency margin.

The basic objectives of the new risk-based supervision model are: to strengthen the risk management systems of insurers; to carry out preventive control; to have a more flexible regulation emphasizing on principles; to have a supervision system in financial sector assessment programme, the objective is to evaluate the strength of the financial systems in the country.