The insurance industry regulatory authority, National Insurance Commission (NAICOM) will commence the implementation and enforcement of the Corporate Governance Code as from April 1, 2016. The corporate governance code was introduced in the insurance industry since 2009 but has not been strictly enforced.
The commencement of the enforcement of the code is therefore seen as a major step by the Commission towards full implementation of its Risk Based Supervision (RBS), a globally accepted supervisory model that will launch Nigerian insurance industry into the main stream of global best practice standard.
NAICOM disclosed plans to enforce the corporate governance code and implementation of risk based supervision at the weekend at the second edition of the Insurers’ Committee meeting in Lagos.
The meeting is similar to the regular Bankers’ Committee meeting and it is attended by operators and NAICOM officials.
Briefing the media at the end of the meeting, Chairman, Publicity and Communication Sub-Committee, Mr. Oye Hassan-Odukale said the commission has intimated them with the plan to commence implementation and enforcement of the corporate governance code.
Hassan-Odukale, who is also the Managing Director of Leadway Assurance Plc, explained that the code was introduced by the commission since 2009 but that due to some reasons, the commission has not been too firm in its implementation.
“We had old corporate governance code which was introduced by NAICOM in 2009, but for some reasons, they have not been too firm on it but we are told that from April 1, NAICOM is going to enforce it. There are some other codes like the one of last year but NAICOM has agreed that since the Financial Reporting Council (FRC) is coming up with a new code, they will just allow FRC code when it comes out to supersede the present code. So we are given up to April to comply with the 2009 corporate governance code,” he stated.
He said the Committee, which plans to hold similar meetings regularly with the next edition coming up in April, will use the meeting as an avenue for NAICOM and operators to address some issues and challenges confronting the operators.
On the RBS model, he said, operators and the commission have agreed to transit to RBS model, adding that it will enable operators shore up their capital in line with the businesses they want to underwrite.
“We had a lecture from NAICOM on RBS, which is where we are transiting to. With RBS, there would not be common capital base for insurance companies again. Companies have to determine their capital in line with the business they do. The board of insurance companies would have the responsibility of determining the risk capital for their companies which would be supported by the appropriate capital. This is new in Nigeria. Just like the International Financial Reporting Standard (IFRS), we are transiting to this new initiative and NAICOM is taking us through it so that we can move our capital structure to this base,” he said.
Also speaking on the implementation of the RBS, the Deputy Commissioner for Insurance Finance and Administration, Mr. George Onekhena said some work has already been done.
“We have the corporate governance, we have mentioned that and we have the risk management frame work. Market conducted guideline, which has been issued. What we have to do now is a kind of coming up with road map on implementation plan in the next two months in which we will identify the role of all parties. So the date for implementation of all aspects has been set stretching from education and awareness, development of the risk based transition framework, impact assessment, pilot testing and implementation arrangement,” he explained.
The RBS, according to the World Bank, is a supervision approach that considers each of the risks that companies face and through a structured process, identifies the risks that are most critical to the financial viability of the institution.
Under the model, the supervisory on-site review process looks at the management of the key risk areas of a company and focuses attention on the critical net risk exposures.
Introduction of the model in insurance industry, which was announced by the Commissioner for Insurance, Mohammed Kari , two years back when he was Deputy Commissioner for Insurance Technical is a sharp migration by the NAICOM from the hitherto compliance-based supervision model and is part of its steps to build globally competitive industry.