Expert Advocates Risk-based Regulatory Model in Insurance Market

Ebere Nwoji

Insurance expert and Actuarial Scientist, Dr Prius Apere, has stressed the need for introduction of Risk-based regulatory model, a combination of Risk-based supervision (RBS) and risk-based capital (RBC) in the regulatory system of Nigerian insurance sector saying it was imperative for the growth and development of the insurance market.

Apere, a former Managing Director Linkage Assurance and currently Chairman/CEO Achor Actuarial Services Limited insisted there was need to introduce risk-based approach and to depart from the prevailing static and rules-based approach to define acceptable behavior.

In a statement, he noted that this has been in the front burner of NAICOM’s insurance market development mandate over the years without real success.

According to him, RBS is a dynamic approach of assessing the probability and severity of material risks facing an insurer. 

He added that in RBS, the supervisor is equipped with tools and knowledge to examine the business of insurers through offsite monitoring and onsite inspection processes: evaluation of risk profile and adequacy of risk management systems, quality and effectiveness of corporate governance, market conduct among others.

“RBC is measure of a minimum amount of capital an insurer must hold (enough to absorb potential losses) arising from the risk it is exposed to.

RBC regulation offers only a point-in-time assessment of capital levels and is essentially a retrospective view of capital, which differs from Solvency II approach, being a prospective view of capital, uses a one-year capitalization time horizon,” he stated.

Apere highlighted reasons risk-based approach would work better as an imperative for insurance market development than the rules-based approach adding that the insurance market development in Nigeria has often been constrained by an absence of innovation.