Consolidated Bill and Future of Insurance Sector
The Consolidated Insurance bill has been on the table of Nigerian lawmakers for over 12 years waiting for passage. Ebere Nwoji looks at the impact of the delay to the advancement of insurance
The 2020 consolidated insurance bill when passed into law is expected to effect a lot of changes in the insurance sector narrative.
Indeed, the bill holds a lot for the industry as expectations are high that the long awaited bill when passed into law would redefine the industry, strengthen it from the weaknesses of the moribund insurance Act 2003 and place the industry on the global best practices pedestal.
Insurers believe this and have thus continued to pursue the passage of the bill with vigor.
At a recent press briefing in Lagos ahead of the Annual General Meeting of the Nigeria Insurers Association, the association’s Chairman, Ganiyu Musa, said that insurers were closely monitoring developments on the Consolidated Insurance Bill and would continue to pursue same doggedly until it is finally passed into law.
Musa said, “The Association has participated in all the processes thus far and would continue to monitor developments in respect of the bill as it receives legislative attention.”
According to him, it is expected that the new law will have a positive impact on the insurance space in Nigeria and align it with global best practice.
“We must acknowledge the cooperation received from the Speaker, Federal House of Representatives, Rt. Hon. Femi Gbajabiamila, Chairman and members of the House Committee on Insurance and Actuarial Matters, National Insurance Commission (NAICOM) and other stakeholders in the journey thus far.
“We remain cautiously optimistic that the Bill will be signed into law before the tenure of the 9th National Assembly lapses.”
Engagement with Government
He also said the association has scaled up its engagements with the government with a view to creating more understanding of the importance and role of insurance in the national economy.
Musa said under the engagement process, his team has had engaged representatives of Federal Ministry of Finance, Budget And National Planning, the office of the Head of Service and the Accountant General’s Office on the issue of provision of appropriate data and payment of premium on Insurance of government assets.
This he explained was to ensure that matters of common interest were discussed and agreed to avoid friction.
“We thank the Commissioner for Insurance and the entire management of the Commission for the excellent relationship and support received,” he also said.
Issues addressed by bill
To the NIA Chairman, one of the foremost issues the bill has settled was the definition of capital in insurance domain. Before now the issue of capital has been a controversial point between the operators and the regulator. This has resulted in cancellation of several proposed recapitalisation exercises in the industry.
THISDAY notes that several attempts by NAICOM to conduct peaceful and successful recapitalisation exercise in insurance sector were often foiled by controversy over what constitutes capital for insurance industry.
Last recapitalisation exercise in the industry was done in 2007, since then several attempts to conduct fresh round of capital increase has been marred by controversies.
In one of the attempts, the controversy took this shape: while the industry operators insisted that fixed assets of individual firm should be valued and included in its capital, NAICOM the regulator said no, arguing that rather than this, firms should irrespective of their assets base and value get liquid capital to the minimum tune specified by the new capital regime while its fixed assets stands alone.
The commission argued that this should be so because there were firms with strong fixed asset base but without liquid cash to drive their businesses and all efforts to convert the fixed assets to liquid cash has been difficult.
The commission argued that such firms found it difficult paying claims and has been denting the image of the industry irrespective of their strong asset base.
But the 2021 finance Act spelt out what should constitute capital in insurance industry thereby putting to rest these arguments.
Commending the federal government on the Act, Musa said, ”We are delighted to report that with the President’s assent to the Finance Act 2021, we now have a more acceptable definition of capital. Prior to this time, the definition of Capital in Insurance Act 2003 was defective and highly restrictive.
“We appreciate the Hon Minister of Finance, Budget and National Planning, Commissioner for Insurance, KPMG and members of our association for their support in seeing this process through. We are optimistic that this major milestone achievement has removed the major encumbrance on the recapitalisation exercise, ”the NIA Chairman said.
He said the association was closely monitoring developments on the Consolidated Insurance Bill 2020 and would continue to pursue same doggedly until it is finally passed into law.
“The association has participated in all the processes thus far and will continue to monitor developments in respect of the bill as it receives legislative attention. It is expected that the new law will have a positive impact on the insurance space in Nigeria and align it with global best practice.
“We must acknowledge the cooperation received from the Speaker, Federal House of Representatives, Rt. Hon. Femi Gbajabiamila, Chairman and members of the House Committee on Insurance and Actuarial Matters, National Insurance Commission (NAICOM) and other stakeholders in the journey thus far.
“We remain cautiously optimistic that the bill will be signed into law before the tenure of the 9th National Assembly lapses”, he stated.
FG’s position
At his conferment ceremony as the grand patron of the Chartered Insurance Institute of Nigeria (CIIN) President Muhammadu Buhari had given the insurance industry his word that the Consolidated Insurance Bill 2020 would be given immediate attention once it gets to his desk.
“Once the National Assembly has finished the process of reviewing the Consolidated Insurance Bill 2020 and is forwarded to me, I will speedily subject it to the necessary executive checks and sign it into law,’’ the President said, in a statement signed by presidential spokesperson Femi Adesina.
The consolidated Insurance bill now with the lawmakers was submitted to the National Assembly in 2010 with a view to fast track an executive bill to the National Assembly that will facilitate passage of the bill into law.
Professor Joe Irukwu in 2008 led a committee that were charged with the responsibility of looking into the existing law and come out with suggestions on a legislation that will drive the industry in this 21st century.
The commissioner for insurance Mr. Sunday Olorundare Thomas, is of the view that the review of the existing law which was insurance Act 2003 would have a great impact in the operation and development of insurance industry in Nigeria.
According to him, it will give legal backing to the solid foundation already laid by NAICOM.
Former President of Nigerian Corporation of Registered Insurance Brokers Mr. Shola Tinubu had said that review of the insurance act was of utmost important to the insurance as the future of the industry lies much there.
According to him the prevailing law has a lot of weaknesses and can no longer drive the industry in the present century.
Former Chairman NIA and Managing Director Consolidated Hallmark Insurance, Eddie Efekoha noted that weakness of the existing law was part of the industry’s problem and has been encouraging some of the vices happening in the industry.
One of these, according to him, is the low amount of fine to be paid by offenders of some of the laws such as third party insurance or compulsory builders insurance, adding that it does not encourage compliance.
Recommendations
One of the recommendations of the industry operators in the bill is the reintroduction of Risk Based Supervision capital model describing it as the right capital model for the insurance industry in order to align the industry with international best practices and reposition it for accelerated growth and development.
Risk based capital is a method of measuring the minimum amount of capital appropriate for a reporting entity to support its overall business operations in consideration of its size and risk profile.
Another recommendation of insurers in the bill is N5 million fine for fake insurance certificate perpetrators
