NAICOM Moves to Save Weak Insurance Firms from Collapse

The National Insurance Commission (NAICOM) recently took decision that may serve as a final step to save the identified weak firms in the system from total collapse.

The commission, was said to have written administrative letters to insurance firms that are presently undergoing financial challenges as revealed by the published financial reports, guiding them on how they could manage their funds to enable them overcome their financial challenges.

NAICOM sources said the steps were taken to save the firms from total collapse that may attract regulatory decision on them. The development is in line with a recent statement by the Deputy Commissioner for Insurance Technical Mr. Sunday Thomas concerning ailing firms.

Thomas had said that unlike what happened in the banking sector, the commission, does not derive pleasure in withdrawing operating firms’ licence because of the enormous implication to not only the firm but the general public.

He said withdrawing of any firm’s licence is the last option to be considered by the commission in treating a case in its regulatory functions.

THISDAY gathered that after examining and publishing the accounts of insurance companies, late last year, the commission identified those with financial problems and confronted them with issues observed in their reports and mandated them on what to do to improve their performance.

From the published reports, 12 insurance companies urgently need to shore up their shareholders’ funds in 2018 to enable them play comfortably well in the highly competitive underwriting business.

According to the reports, the firms currently operate below/ slightly above the industry’s statutory shareholders’ funds.

The reports noted that whereas the commission in the last recapitalisation exercise carried out in 2007 required Non Life insurance firms to raise their shareholders’ fund to N3 billion; Life Insurance operators, N2 billion, Composite firms N5 billion and Reinsurance firms N10 billion, a company like Standard Alliance Insurance Plc operating as a composite firm which supposes to have N5billion currently has N4.65 billion. Guinea Insurance Plc has N2.89 billion as against N3 billion required. International Energy Insurance( N2.12 billion); Goldlink Insurance (N-4.25 billion) and Unic Insurance (N587.81 million).

Those slightly operating above the statutory fund are: KBL Insurance, N3.52 billion; Old Mutual General Insurance, N3.59 billion; Staco Insurance N3.76 billion; Sterling Assurance N3.49 billion; Capital Express, N2.16 billion; ARM LifeN2.75 billion and Wapic Life N2.27 billion. Responding to question by THISDAY on why strict disciplinary action like license withdrawal should not be applied on these companies and others who although have the prerequisite capital but often do not play according to rule Thomas replied that the commission prefers to exhaust every other available administrative, supervisory and regulatory tool before such negative measure is applied.

An industry observer who spoke to THISDAY on this said this development is that the commission may, in the current year and in the near future have more firms under its management and monitoring and may have cause to appoint more interim managers for more insurance firms.

It was gathered that major problem of the above firms are huge management expenses, inability to make profits for consecutive years , huge claims coming their way especially in businesses some of them did not charge appropriate premiums among others.