NIA canvasses introduction of risk-based capital
The Nigerian Insurers Association (NIA) has recommended the introduction of risk-based capital to the Consolidated Insurance Bill, describing it as the right model for the insurance industry to align with the market to reposition for growth.
The Deputy Director, Corporate Communications, Human resources & Administration, NIA, Davis Iyasere, who spoke to The Guardian, noted that the recommendation was made during the association’s presentation at the two-day public hearing on the Consolidated Insurance Bill 2020 by the House of Representatives Committee on Insurance and Actuarial Matters in Abuja.
He said the Chairman of the Association, Ganiyu Musa, stated that in adopting the risk-based capital adequacy template, the Association took cognisance of the need to consider insurance, market, credit and operational risks as well as the need to apply such capital charges on assets and liabilities.
He hinged the Association’s position on the 2013 International Monetary Fund (IMF) report on the Nigerian insurance industry, which prescribed the risk-based capital model as most suitable for the 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 would bring to an end the contentious issue of the definition of the right capital model required by the market.
“We are convinced that the 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 with it,” he said.
Speaking on the development, the Director-General of the Association, Mrs. Yetunde Ilori, stressed that risk-based capital is the direction to go if the insurance industry is to attract the right investment and increase insurance contribution to the Gross Domestic Product (GDP).
She expressed hope that given the fact that the insurance operators are searching for funds to recapitalise their operations, adopting the model would make the insurance industry attractive to investors.
The 2020 Consolidated Insurance Bill is expected to address some of the gaps in the 2003 Insurance Act and reposition the industry to attain its full potential.