Insurers back mega underwriting framework

INDUSTRY chieftains have come out in support of mega insurance and brokerage institutions by way of mergers and acquisition as a survival option for the existing insurance companies in the harsh competitive environment.

Operators believe that by coming together these weak insurance and brokerage companies would become stronger to meet regulatory requirements as contained in the Insurance Act 2003.

It will be recalled that the National Insurance Commission (NAICOM) recently revoked the operating licence of 108 insurance brokers operating in the country for violating Insurance Act 2003. However, the commission has given stringent conditions for re-registration of brokerage firms whose licence have been revoked on payment of N2.75 million. The federal government may have given the National Insurance Commission (NAICOM) full support in the current war against indiscipline and infractions in the conduct of insurance business in the country.

Industry sources told The Guardian that the stringent enforcement measures taken by the industry’s regulator against infractions and flouting of insurance regulation in the conduct of business has the full backing of the government, specifically to weed the industry of weak underwriting and brokerage firms in the insurance market.

The Managing Director and Chief Executive, FBNInsurance, Val Ojumah, in his remark said ”We support the regulation enforcement that are being released from the regulators desk. As a company that has existed over the last five years, we have never been found wanting in any of the regulations. We are very proud of our achievement in this area, we are aware that many insurance companies are struggling to meet the terms of those regulators, but as a corporate governance company from day one, we have made up our mind to work with the regulator and to make sure that we add value to insurance benefits.

According to him, about 35-40 per cent of the market are controlled by less than five companies, about 55 per cent of the companies are sharing very minute percentage of the market, it is not very good for the market. If you remember many years ago when NICON and Nigeria Re were on ground, they were giving stronger capacity to the African market. They were respected, strong, they had very large balance sheet, they would chase policies not just in Nigeria but in Africa-wide, that is what we need to get back, but there are hopes.

Ojumah said “but with the new regulations, they would strive to create mega insurance and brokerage companies so that these mega insurance companies will then help to moderate practice, create bigger balance sheet, increase penetration and distribution”.

He said, “I think that when we are able to increase mega insurance companies around our space in Nigeria, the Nigerian insurance industry will become more relevant in the scheme of thins, it is something that we think will happen.”

The chief executive of an old generation insurance companies in the market who pleaded anonymity said “mergers and acquisition are the only survival option for a number of existing insurance and brokerage firms to take, because the tough regulatory measures introduced by the commission four years ago demanded full disclosure, transparency, accountability from operators which also exposed the unethical practices that are going in the operation of insurance business in this country.

According to him, “the regulatory enforcement by the commission has impacted heavily on the operation of insurance and brokerage firms in the industry to the extent that majority of these companies cannot file their quarterly returns to the regulators on the stipulated time for approval”.

He said, “it is a fact that many of the existing companies are having serious financial challenges and this has impacted heavily on their operations. The only meaningful option is for these small companies to merge their operations as an escape route for survival in the current reforms in the insurance market. According to him, it is certain that the commission has the endorsement of government in its change agenda to enforce extant laws and sanction operators that have violated the insurance regulation to align it with the power of other financial services regulators in the country, it is left for the existing companies in the industry to embrace merger option as a survival strategy in the industry.