Capital base verification to commence in insurance industry
By Abdul Olalekan
The 58 insurance and reinsurance companies in the country will have their capital base verified by the National Insurance Commission (NAICOM) in a move that will lead to commencement of Risk Based Supervision (RBS) and recapitalisation, Business 247 News Online has learnt.
This exercise is coming up, 10 years after the last recapitalisation exercise took place in insurance industry in the country, despite the business environments and the risk profile of all insurance companies have changed since 2007 recapitalisation exercise.
A statement from the Head, Corporate Affairs, NAICOM, Mr. Rasaaq Salami and made available to Business 247 News Online, noted that the commission will undertake the verification exercise to determine the capital resources of all insurance companies during the first quarter of 2017.
The move, NAICOM said, was to ensure protection of policyholders and beneficiaries of insurance contracts against unexpected losses.
According to the commission, “It will entail a verification of the Assets and Liabilities of insurance companies. In preparation for this, boards are advised to ensure fairness in valuation of assets and liabilities of their companies when presenting the financial statements for the year ending 31st December, 2016.”
It advised all professionals that participate in the financial reporting supply chain to ensure their duties in the valuation of assets and liabilities and issuance of opinion on financial reports are discharged creditably in accordance with relevant laws and professional standards.
The continuous increase in management expenses has been a source of concern to the regulator for some time now, as it has led to under capitalisation of some insurance firms in the country.
Business 247 News Online learnt the sum of N294.90 billion was spent on management expenses within five years by some insurance companies and that is negatively affecting the operations of the affected firms.
The management expenses are classified into; underwriting expenses, salaries, rents and others, excluding commission to agents.
A report obtained from the Nigerian Insurers Association (NIA), revealed that non life operators incurred N220.91 billion and life operators spent N73.99 billion between 2010 and 2014.
