New sector reform targets capital, business classifications
The move is being scripted to trigger growth in the nation’s underwriting model and position it on the path of relevance.
The Commissioner for Insurance and Chief Executive Officer of National Insurance Commission (NAICOM), Muhammad Kari, disclosed this at a lecture delivered at the Executive Breakfast meeting organised by Society For Corporate Governance Nigeria(SCGN) in Lagos.
Themed: ”Corporate Governance and The Nigerian Insurance Industry”, Kari said, the new policy, would see a shift from the recent rule-based classification, where companies only comeon with their capitals to the risk-based system, to where companies will be restricted to areas of competencies and abilities.
He pointed out that insurance is the only growth area of the economy left, stressing that when fully rolled out, companies, with capital base of about N2 billion would restrict operations to insurance of motor cars, buildings for fire and alike, while those with higher capital based can go into oil, ship, aircraft and engineering equipment.
According to him, what we are coming out with is going to force companies to operate within their ability to their capital asset so that the policy holder and companies are protected against their wishes to go into areas where they cannot afford.
He said: “We are used to classify companies with they capital they can bring in but we are reaching to the process of introducing risk based classification which will try to see what your asset or capital can cover.
“I don’t see the stock market growing again, of course it is dry now. I don’t see the banking sector growing bigger but the insurance penetration is under one per cent and under one per cent contribution to the nation’s Gross Domestic Product (GDP).
“There is a lot of potentials in the biggest economy in Africa. With the population we have, you can imagine if we are able to increase our earnings and make companies responsible, you can imagine what it will be.
It will help the economy create employment and bring financial support to businesses and government.
“Right now, majority of the risks in Nigeria are funded by government, whether building collapse, flood, deaths, when people can take insurance in all of these things”, he added.
Also, the President of Society for Corporate Governance Nigeria, Pascal Dozie, regretted the miss positioning of the insurance industry in Nigeria, saying a nation couldn’t be developed through banking industry without capital formation.
According to him, it is within the insurance sector that capital can be formed to develop the country.
Rather than focus in the banking, there should be a shift to the insurance sector, because in some climes, insurance firms own banks and not the other way round in Nigeria, where the banks own insurance firms.
Dozie, a former banker, stressed the need to prod the industry to play a role they should play for the development of the country.
“As a banker, I am not happy, unless we got insurance capital formation, it is going to be difficult for us as we always for abroad looking for loans when we could get it from the insurance sector,” he added.
Stressing further on the new policy, the NAICOM boss said in Nigeria, there are some companies that can take big deals and the issue is not whether we have them, but once we bring out the policy clearly, these companies can come together and be better capitalised.
“There are companies that feel that they can raise money to qualify for the bigger deals, investors who are watching proceedings will come out to put their money.
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