Sola Alabadan
SOLA ALABADAN, in this piece, writes that the Insurance Act 2003 is long overdue for amendments, canvassing that the National Assembly should work assiduously to make the Insurance Bill 2020 becomes law soonest, to address observed challenges and make the industry contribute its expected quota to the nation’s economy.
Need for Amendment
The Insurance Act 2003 guiding the insurance business in Nigeria is already 18 years old and since it is indubitably true that there is no perfect law anywhere in the world, the Insurance Act is long overdue for amendments, so that the law can be in tandem with the current realities in the country.
There is, therefore, no gainsaying the fact that between the time the law became effective and when the calls for amendments started, several significant changes had taken place in our national economy and especially in the financial services sector culminating in the global economic recession of 2008.
Thus, it was a cheering news when the Federal Government through the Federal Ministry of Finance, decided to have a Committee led by Professor Joe Irukwu to review the insurance laws and on that basis, pursue the amendment of an obviously stale and retrogressive set of laws. However, the Insurance Amendment Bill 2008 did not see the light of the day.
In a similar vein, in February 2016, Kemi Adeosun, the then Minister of Finance inaugurated the Committee for the Review of Insurance (Consolidated) Bill. The Committee chaired by Dr. Omogbai Omo-Eboh, an expert in Insurance Law and Talmiz Usman, head of Legal Department, NAICOM as the Secretary, was given 90 days to submit their report.
The committee was to “review all the insurance laws in Nigeria to align with international best practice and to examine current market problems and recommend appropriate regulatory powers to allow the insurance sector thrive”. Again, the review was to “form the basis for a draft bill to be forwarded to the National Assembly for enactment into a new insurance law”, that is, the Insurance Consolidated (Amendment) Bill 2018. Unfortunately, the report was not given favourable consideration.
Nonetheless, hopes are high that the Consolidated Insurance Bill 2020 may just be what the insurance industry in the country has been waiting for. While all the provisions of the Bill can not be highlighted in this piece, for want of space, it will be helpful to take a cursory look at some of its salient provisions.
Bill is necessary for proper recapitalisation
Section 13(1) of the Consolidated Insurance bill 2020 stipulates “No insurer shall carry on insurance business inNigeria unless the insurer has and maintained, while carrying on that business, a paid-up share capital of, in the case of:
(a) life insurance business, not less than N8,000,000,000.00;
(b) non-life insurance, not less than N10,000,000,000.0O; or
(c) reinsurance business, not less than N20,000,000,000.00”
Recalled that NAICOM had mandated life insurance firms to meet a minimum paid-up capital of N8 billion, up from N2 billion, while general insurance companies are expected to increase their paid-up capital to N10 billion, from the earlier N3 billion.
Composite insurers (life and non-life operators) were asked to recapitalise to the tune of N18 billion as against the previous N5 billion, while reinsurance outfits were required to have a minimum capital of N20 billion, from N10 billion obtainable in the past. December 31, 2020, was the deadline for underwriting companies to raise 50 per cent of the new capital.
After some stakeholders in the industry filed suits asking the court to stop NAICOM from proceeding with the recapitalisation exercise, the commission had to suspend the insurance industry recapitalisation exercise for the second time in three years. In 2018, some shareholders took the commission to court to stop the tier-based recapitalisation exercise under the then Commissioner for Insurance, Alhaji Mohammed Kari.
Once the bill is passed into law, the perennial problem of recapitalisation in the industry will become a thing of the past. While it may be argued that recapitalisation is not the only problem of the insurance industry in Nigeria, it is safe to infer that the amendment of the laws will duly address the other problems bordering on governance and protection of policyholders.
Insurers recommend risk based capital model
During the public hearing on Consolidated Insurance Bill 2020 organised by the House of Representatives Committee on Insurance and Actuarial Matters in Abuja, the Nigerian Insurers Association (NIA) recommended introduction of Risk Based Capital in the Consolidated Insurance Bill.
The association described it as the right capital model for the insurance industry in order to align the Nigerian insurance market with international best practice and reposition the industry for accelerated growth and development.
In adopting risk based capital adequacy template, NIA’s Chairman, Ganiyu Musa, said the association took cognisance 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 (all capital resources inclusive).
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.
Ending fake insurances
In view of the fact that motor insurance is made compulsory by law, unscrupulous people have continued to issue fake motor insurance documents to unsuspecting motorists, at the expense of licensed insurance operators.
The Nigerian Insurers Association had earlier disclosed that there are currently 12 million registered vehicles on the roads across the country, regretting that only 2.36 million are insured, while the remaining 9.64 million vehicles parade fake motor insurance certificates.
It therefore gladdens the heart that the Consolidated Insurance bill already prescribed N5 million fine for fake insurance racketeers, as well as heavy sanctions for the uninsured.
Section 9 of the bill provides that “A person who transacts any insurance business without being licensed for that purpose under this Bill, commits an offence and is liable on conviction, in the case of:
(a) a company, firm or other combination of persons, each principal officer of the company, firm or other combination of persons responsible to a fine of N5,000,000.00 or to imprisonment for a term of 2 years; or
(b) an individual, to a fine of N5,000,000.00 or to imprisonment for a term of 2 years.”
This development, according to market observers, will force defaulting motorists to go for genuine insurance certificates, thereby yielding billions of naira in premium income to the insurance industry.
Last line
Apart from the issue of recapitalisation and this provision to bring an end to fake insurance documents, there are many other laudable provisions such as those on compulsory insurance of public buildings, insurance of buildings under construction, among others, which the industry has not been able to implement creditably well since 2003, but have now been adequately catered for in the proposed law.
The lawmakers at the National Assembly and the federal government will do well to expedite actions on this Consolidated Insurance bill 2020 and let it become law, as a matter of urgency.
