The new NAICOM board is headed by a former Deputy Speaker of the House of Reps.
The Federal Government on Tuesday foreclosed any plan to issue fresh licenses to new insurance companies in the country, just as it ruled out further funding support from the government for the National Insurance Commission of Nigeria (NAICOM).
The Minister of State for Finance, Yerima Ngama, who stated this at the inauguration of the new board of the insurance sector’s regulatory authority in Abuja, said there were more than enough insurance companies to serve the needs of the insured and other stakeholders in the economy.
Mr. Ngama said, however, that what was required was the need to strengthen the regulatory frameworks in the sector to enhance insurance services being offered by the existing operators.
The minister said he believed that most of the existing companies were not operating optimally due to a combination of factors constraining the efficiency of the insurance companies.
He said that the inauguration of the 11-member NAICOM reconstituted Governing Board, led by former Deputy Speaker of the House of Representatives, Chibudom Nwuche, was part of government’s ongoing reform in the sector aimed at repositioning the industry on the path of sustainable growth.
The initiative, he said, would help in charting a new course of moving the industry forward as a strategic step towards improving its contributions to the nation’s Gross Domestic Product (GDP).
“Penetration of insurance in this country is very poor, mainly because of the rigidity in the system. And we have to really do something about the way the industry is structure,d otherwise it will not work,” he said.
“We have an industry that is dependent on the brokers; they determine who gets what. We have an industry that the income is recognised before it is realised, and these all gave rise to certain practices that have given rise to unwholesome practices in the industry. That is why we are reforming.
“The first reform we are adopting is a cash-based accounting system, just like the banks. You earn interest and you suspend it when the loan is not performing. The same thing applies with insurance. This is a very serious reform we have done.
“Another issue is no premium, no cover; and that actually changed the industry. Today, everybody has confidence in the system, because you cannot just go and cook something and say this is where you are,” Mr. Ngama said.
The Minister said that everything was being done, including the planned passage of the amended NAICOM law, such that the regulator can be properly repositioned to play better its statutory roles of effective regulation of the industry.
“We can, with this, have a regulator that can actually bark and bite, and we want the new board to give the management very strong support. Don’t yield to pressure,” he enjoined the Board.
“We have so many insurance companies that are just on the shelf, distressed. But it is either we liquidate them or get some serious people to take them over. So, there is no need to issue new licenses when they have several licenses to take over.
“It is just like the banking system. If we have so many distressed banks, why should we issue a new license to a bank? Why not buy one of the distressed ones and restructure it? That is why the sector does not have a single distressed bank.
“So, it is the same thing with insurance. We have so many of them. Anybody who is interested in investing in them is welcome. In fact, we have attracted a lot of investments from outside. Let them come and take off and let us see even if you buy two or three, we will give the support that is required. We can say that we have cleaned the stable. So, there is a lot that we need from the new Board to allow the management to become firm” the Minister said.
In her remarks, the Minister of Finance and the Coordinating Minister for the Economy, Ngozi Okonjo-Iweala, said with the calibre of the members, government had no doubt that the new Board would use their experiences to improve the performance of the industry.
Mr. Nwuche assured the government of the new Board’s determination to help in transforming the industry, particularly in providing the law that would enable the commission to play its roles better and ensure that operational standard of the sector conforms to international best practices.