Need for regulatory framework in insurance industry

Ayeleso Oladele, Lagos

If what that insurance Icon, Mr. Remi Olowude, executive vice chairman of Industrial and General Insurance Company (IGI), said about the Nigerian insurance industry shortly after the commencement of the consolidation exercise, that the biggest insurance company should not be smaller than the smallest bank in Nigeria is anything to go by, then from all indication, the industry needs a strong, well informed, developed and professionally induced regulatory frame work.

The aforementioned factors became very important to the nascent consolidated insurance industry to be able to contend with challenges of registering its presence in the global market because a weak regulatory will not do what will take the industry to global standard.

The rate at which investors are embracing the insurance stocks on the floor of Nigeria Stock Exchange market plus the rate at which brokers are propagating the gospel of investing in insurance stock could go a long way to denote that Nigerians have started embracing insurance unlike pre consolidation era.

There is no doubt that the industry has started redeeming its dented image of delay in payment of claims or no payment at all with the rate at which it pays claims this time around which most of the time are published on the pages of Nigeria newspapers to show that the era of fringe players has become a forgotten issue in the industry rather, time to celebrate big companies. Of course, the fear that any company that fails to pay claim as at when due may lose its customers may not permit any company to toy with claims payment.

Moreover, the strategic plans of most of the recently certified companies to roll out different products that will ensure that insurance reach the grassroots unlike what it used to be in the industry in addition to plans of some operators to go beyond the shore of Nigeria planning to dominate at least some major countries in Africa can also go a long way to convince anyone that the sector really meant business.

However, there is need to sustain this tempo and to do more, taking a clue from the experience of the banking sector. There is no doubt that the Nigerian insurance industry has a lot to learn from the experience of banking consolidation for its own consolidation to achieve the desired goals. It can easily avoid some of the unexpected challenges of the banking experience and with the benefit of insight, proactive steps can be taken to ensure that the gains already recorded are sustained and other milestones are achieved as soon as possible.

It must also be appreciated that the attainment of post consolidation goals requires the cooperation, trust of all stakeholders. The institutionalization of sound corporate governance and appropriate regulatory oversight are very important.

The dogged determination of Professor Chukwuma Soludo and his team, cum the professional touches in all the innovations can not be undermined. Insurance sector cannot afford to do less. The weak structure in place may not be able to carry the industry far.

A month after assumption of office, on July 6, 2004 , the Governor of the Central Bank of Nigeria (CBN), Professor Chukwuma Soludo at a special Bankers’ Committee Meeting announced a 13 point reform agenda for the Nigerian banking industry. These are as follows: N25 billion minimum capitalisation for banks with full compliance within 18 months, phased withdrawal of public sector funds, consolidation through merger and acquisitions, adoption of a risk focused and rule based regulatory framework, adoption of zero tolerance in regulatory framework, the automation process for rendition of returns, strict enforcement of the contingence planning framework for systematic banking distress, establishment of an assets management company, promotion of enforcement of dormant laws, Establishment of a hotline, confidential internet address for sharing confidential information with the government, revision and updating relevant laws and writing of new ones for effective operation of the banking system. Closer collaboration with Economic and Financial Crimes Commission (EFCC) in the establishment of Financial Intelligence Unit (FIU), rehabilitation and effective management of the Nigerian Security Printing and Minting Company.

In a nutshell, the financial sector reform was designed to ensure a diversified, strong and reliable banking sector which would ensure the safety of depositors’ money, make banks play active developmental roles in the Nigerian economy, and make them competent and competitive players in the regional and global financial systems.

By and large, it was a milestone effort to correct all the weaknesses that had hindered the banking sector from supporting the economy for optimal sustainable growth and development. The reforms were expected to lay a solid foundation for strengthening the banking sector in order to position it to respond promptly and appropriately to the dynamics of the Nigerian economy. The result of these agenda is obvious in the banking sector today.

Leaders of the National Insurance Commission (NAICOM), Nigeria Insurance Association (NIA), Chartered Insurance Institute of Nigeria (CIIN), National Council of Registered Insurance Brokers (NCRIB) and every other regulatory body in the insurance sector should have a lot to learn from the banking sector.

The government continuous interference in the affairs of the industry is an indication that issues has not been handled to the satisfaction of the government thus the government’s need to meddle in the affairs of the industry. Notwithstanding, the regulation of the industry is the responsibility of the government but to be carried out through its agencies such as NAICOM. Government direct intervention could also denote that it cannot fold its arms while things are going wrong or messed up within the industry.

Crusader Insurance to raise N10bn from NSE

Oladele Ayeleso, Lagos

As the Nigerian insurance company braces up for their turn to hit the Nigeria Stock Exchange market to raise more funds just as it was experienced in the banking sector shortly after the consolidation exercise in the sector, Crusader Insurance Plc., one of the 49 insurance companies that made the last recapitalisation exercise, is concluding plans to raise more funds from the floor of NSE.

This plan was disclosed by the Managing Director of Crusader Life Insurance limited, Mr. Oyelami, last week in his office at the Broad street, Lagos. The company’s MD said that the company would definitely approach the market before the end of the first quarter, this year to raise an amount that is not less than N10 billion to add to the current capital base of the company.

Oyelami who is optimistic that whatever amount the company plans to raise from the public would be well over subscribed said that it would leverage on its goodwill taking a clue from the past experience. He said that the company is well known by the public for giving dividends and bonuses to its exiting shareholders on regular basis.

Aside the aforementioned, Oyelami noted that the recapitalisation exercise that led many of the companies to the market and the aftermath saga had helped to publicise the sub sector of the Nigeria economy.

“I am very sure that people will embrace the coming offer, I said it the last time the our shares were under quoted, look at how much we sold it then, now as at yesterday (Wednesday) the price was N6.30. the volume at the stock exchange fluctuate between banks and insurance to show that insurance stock has gained awareness,” he explained.

Mr. Oyelami who is now the managing director of only the life sector of the company he was managing before the commencement of the last consolidation exercise in the industry, said his believe in professionalism and specialisation could not be daunted.

He noted in his words that it is only in Nigeria that insurance players still talk of composite in the industry because the Act has not amended it, claimed that in every other part of the world, they hold specialisation in high esteem.

According to him, the industry would record an impressive result in year 2008, because it would soon be reaping the benefit of the consolidation programme. He cited the example of the development that is taking place in the nation’s Oil and Gas sector, which he claimed would open more business opportunities for the industry.