Operators Threaten Showdown with NAICOM over Recapitalisation Deadline

• 5.8m Nigerian motorists carry fake insurance

Ebere Nwoji

The decision by the National Insurance Commission (NAICOM) to revise backward the recapitalisation deadline from the January 1, 2019, it had earlier fixed, to October 1, 2018, is causing ripples in the industry.
In fact, THISDAY gathered that some operators are threatening legal action against NAICOM.

This is just as the Nigeria Insurers Association (NIA) disclosed that 5.8 million out of the 11.7 million registered vehicles plying Nigerian roads have fake insurance.
At the forefront of the move to take legal action against NAICOM are chief executives of insurance firms that fall within the tier two and tier three categories, THISDAY learnt.

They described the backward revision of the deadline by NAICOM as a deliberate attempt to disrupt the plans and programmes they had put in place to meet the initial deadline of January1, 2019.
One of the chief executives who pleaded anonymous said the commission had warned that any insurance chief executive that speaks to the media would be heavily sanctioned.
NAICOM had on July 25 announced increase in minimum capital base for insurance companies, giving January 1, 2019 as deadline for companies to upgrade their capital to the type of business they want to do.

But in announcing the change in earlier deadline, the commission in a separate circular dated August 27, 2018 stated, “In the exercise of the powers conferred on the commission under extant laws, it hereby issues this circular for the introduction of the tier-based minimum solvency capital requirements, for assessment of capital adequacy and solvency control levels of all insurance companies in Nigeria, with effect from October 1, 2018.

“This circular shall be read in conjunction with the provisions of the Insurance Act, the NAICOM Act as well as other regulations, guidelines, notices and circulars that the commission has issued or to be issued from time to time.”
A CEO of one of the leading insurance firms who spoke with THISDAY on condition of anonymity, because NAICOM has threatened to sanction any operator that speaks with journalists said, “We have given the commission till the end of September to reverse the new date or face their legal action.”

Aside the shift in deadline, operators also kicked against the use of their 2017 solvency accounts for the exercise.
However, analysts at CSL Stockbrokers Limited have warned that, although the recapitalisation of the insurance industry was long overdue considering the deterioration in the capital of underwriters since the last recapitalisation exercise was carried out in February 2007, it was, however, practically impossible for underwriters to meet up with the latest deadline in view of the duration involved in raising capital amidst the current negative sentiment from investors’ in the equities market.

They said, “Furthermore, we believe the recapitalisation exercise if not well managed, could potentially affect investors’ confidence and sentiment in the insurance sector, leading to a knee-jerk sell off on insurance stocks. Furthermore, given the fragile recovery of the economy, there is need to avert the negative consequences associated with the potential collapse of insurance companies who are unable to recapitalise.

“Evidently, there is the need for NAICOM to liaise with insurance companies to ensure a smooth, hitch-free recapitalisation exercise that will reposition the industry for better growth.”
The Chairman Mutual Benefit Assurance Plc, Dr. Akin Ogunbiyi, recently highlighted the dangers of the tier-based capital and regulator’s action, saying it could be counter-productive, anti-growth and disruptive.
Ogunbiyi, who stated this at a forum by Business Today, also said the exercise might usher in a new era of de-listing of insurance stocks from the Nigerian Stock market.

He also said the tier-base recapitalisation could lead to hostile takeovers of insurance firms for peanuts, especially by foreign investors with short term gains as focus.
“This development in my opinion could be counter-productive, anti-growth and disruptive. The immediate implementation of the tier-based rating could lead to crisis of confidence for the entire insurance industry where only about seven of the 29 companies qualify under the new standard,” he stated.

According to him, “As an industry, we need to urgently adopt a value innovation strategy to enable us provide relevant affordable products for our teeming population.
“My advice is that as a priority, we must align insurance services to the unique lifestyles of our citizenry in all income groups.”

5.8m Nigerian Motorists Carry Fake Insurance

Meanwhile, the Nigeria Insurers Association (NIA) has disclosed that 5.8 million out of the 11.7 million registered vehicles plying Nigerian roads have fake insurance.
On the other hand, only 5.9 million Nigerian vehicles have genuine insurance certificates.

These figures, captured by the Nigerian Insurance Industry Database (NIID) of the NIA, were made available to THISDAY yesterday.
The NIA said 5.9 million vehicles with genuine insurance, were those that purchased their insurance policies from licenced insurance companies and are eligible to claims in the event of eventualities.
The National Bureau of Statistics (NBS) in its latest report on road transport had put the number of registered vehicles plying Nigerian roads at 11.7 million.

The NIID is the central database for all insured vehicles. It also serves as a tool to ensure that only insured vehicles are driven on Nigerian roads and helps to checkmate the activities of fake insurance operators.
The premium generated by various policies underwritten by the industry showed that the contribution by motor insurance has been fluctuating.

For instance, NIA figures showed that in 2010, overall premium from motor insurance for the industry stood at N42 billion in 2011, rose to N45 billion in 2012 and was N45 billion in 2013 and declined further toN43billion in 2014, N40 billion in 2015 and N40 billion 2016
The Immediate past Chairman of NIA, Mr Eddie Efekoha, in a chat with THISDAY, confirmed that less than six million vehicles currently have genuine insurance certificates.
He said the association was working towards ensuring that in no distant time, loopholes through which insurance companies lose premiums are blocked.

Efekoha said efforts were being made by the association to extend the NIID to marine insurance to curb the activities of fake marine insurance certificate sellers as well.
He said motor insurance policy alone was capable of growing the insurance sector’s contribution to the Gross Domestic Product (GDP) of the economy, if the right premiums are charged and it goes to genuine operators’ coffer.

He said the volume of businesses that were underwritten by the industry grew from N315.96 billion in 2016, to N363 billion in 2017. Thisrepresented an increase of 15 per cent, just as he anticipated that given the recent collaboration between operators and the industry regulator in various initiatives to deepen insurance penetration, there would be increase in both volume of business to be underwritten and premium generated this year.
He said out of the above figure, motor insurance was one of the policies that made significant contribution to the total premium generated by the industry.

Meanwhile given this debut made by the industry in the use of NIID to curb activities of fake motor insurance certificate sellers, the industry has been urged to replicate same in marine insurance to curb the menace of fake marine insurance sellers.
The Executive Director, Leadway Insurance, Mr. Adetola Adegbayi, saidthis would bring about reduction in fake marine insurance certificates.
Adebgayi observed that marine insurance class of business in Nigeria had suffered serious neglect and malpractices.