By Adedapo Adesanya
The National Insurance Commission (NAICOM) has rolled out its three-year strategic reform (2021-2023) that will see the transformation of the insurance sector.
The commission said the starting point of the reform was to return operating firms to liquidity status by ensuring that they restructure their balance sheets so that those that currently rely on assets that they can hardly turn to cash would effect a major turnaround in their operations and run their business based on cash flow instead of fixed assets.
According to the commission, it has already started this through expert advice on owners of various insurance firms in order not to repeat or face some challenges it had in the past.
For instance, it noted that firms exceeded the maximum level of investment in real estate and are now facing a cash crunch and could not easily turn their assets to cash to keep afloat in business.
It further said it is strictly guiding operators to ensure that going forward none exceeds the 25 per cent maximum investment in the real estate sector.
Making the disclosure recently, NAICOM’s Director of Supervision, Mr Thompson Barineka, who was speaking on behalf of the Commissioner for Insurance, Mr Sunday Thompson, said that most of the firms currently regarded as weak were considered so because they could not quickly turn those assets into cash and continue to discharge their responsibilities to the public.
Mr Thomas said this being the case, the agency, having accomplished the five-year strategic plans it had set for itself, is now embarking on a three-year reform.
This new reform is aimed at positioning the commission as a globally competitive regulator whose functions are compliant with global best practices and whose supervisory roles support strong insurance institutions that can stand the risks of other economic operators and meet the prevailing needs of the insuring public.
The reforms, according to Mr Thomas, rest on five strong pillars namely: entrenching effective and efficient service delivery; ensuring safe, sound and stable insurance sector; adequately protecting policyholders and public interest; improving trust and confidence in the insurance sector; encouraging innovation, and promotion of insurance market development.
According to him, the reform also gears towards ensuring absolute trust on the commission through its promotion of insurance market development tailored towards improving the scope of internal rule-base to a new risk-based supervision approach using its new integrated governance management system.
He further noted that some unexpected occurrences necessitated the need of the reforms, considering the fact that since the development of the last strategic plan which lasted between 2016 – 2020, there have been various events such as the COVID-19 pandemic, the #EndSARS protests, and the rise in kidnappings, armed banditry, communal tensions and conflicts, which have impacted on the activities and initiatives of the commission.
According to him, these events have ushered in the new normal hence shaping how the industry conducts its business going forward and the corresponding regulatory response.
He said this has also created the need to prepare the workforce for the new work order, protection of policyholders, improving human capital, leveraging on technology and creating alternative channels of insurance distribution to stimulate productivity.
He further said NAICOM would also ensure periodic review and performance monitoring of the plan within its life span bearing in mind the pandemic.
He noted that within the first year of his administration, stability has been achieved within the commission and the entire industry with staff welfare at the front burner.
He also noted that his administration has been able to issue licenses to five insurance firms in the category of three life insurance, one general insurance and one reinsurance operator.
Mr Thomas said before his tenure, the last reinsurance firm licensed in the country was 32 years ago while the last insurance firm was licensed 10 years ago.
The NAICOM boss said in line with the three-year strategic reforms, his administration saw the need to bring in new life insurance operators because, in today’s economy, one area driving the flow of funds to the industry is life business.
“Why South Africa is dominating insurance market in Africa is because of its strength in the life insurance business.
“Today in Nigeria, the contributory pension asset is in the neighbourhood of over N12 trillion, it is expected that some of these funds will find their ways to the insurance sector but at present, insurers are still scratching business on the surface,” he added
