The National Insurance Commission (NAICOM) says the Nigerian Agricultural Insurance Corporation (NAIC) will continue to underwrite agricultural insurance schemes in spite of the withdrawal of its general insurance licence.
Mr Olusegun Omosehin, Commissioner for Insurance and Chief Executive Officer of NAICOM, said this on Friday in Lagos during a media interactive session on developments in the Nigerian insurance sector.
The commissioner explained that what NAICOM withdrew was the general insurance licence subsequently granted to NAIC to underwrite other classes of insurance.
Omosehin explained that NAIC was established by legislation specifically to provide agricultural insurance schemes and that the law establishing the corporation remained in force.
He said the federal government would continue to support the corporation and provide additional funding where necessary to address any shortfalls in the management of its agricultural insurance schemes.
“That scheme is secure as long as the Federal Government of Nigeria exists, because it is the government’s initiative.
“What we have withdrawn, however, is the general insurance licence that was added,” he said.
Omosehin noted that the withdrawal would not create a gap in general insurance coverage, as other licensed insurers had the capacity to provide such cover.
He said NAIC would retain its specialised role in agricultural insurance while commercial insurers would provide additional capacity for risks previously underwritten by the corporation.
“NAIC leaving general insurance does not create a gap, because there are other entities that have been licensed to provide cover,” he said.
On the impact of recapitalization on underwriting capacity, Omosehin said increased capital would enable insurers to retain more risks within Nigeria instead of relying heavily on foreign reinsurance.
He explained that an insurer’s retention capacity was linked to its capital base and the amount of reinsurance it could purchase.
The commissioner explained that just two insurance companies dropped specific licences during the recapitalisation exercise after reviewing their business strategies and capital-raising capacity.
He said NSIA Insurance, formerly a composite insurer, dropped its life insurance licence during the recapitalisation exercise.
According to him, the company was required to transfer its life insurance portfolio, including assets and liabilities, to another licensed life insurer.
He said the portfolio transfer to CHI Life had progressed substantially, with NAICOM having issued its no-objection.
He also identified Alliance and General Insurance as another operator that dropped its life insurance licence during the exercise.
Omosehin said the company, which previously operated as a composite insurer, reviewed its capacity to raise the required capital and opted to drop its life licence.
He said the transfer of its life insurance portfolio was ongoing, with NAICOM monitoring the process.
The commissioner noted that NAICOM remained open to considering applications for new licences where investors had credible business propositions capable of addressing gaps in the insurance market.
“We are not shutting our doors, but we are also not looking to just dash out licences,” he said.
Omosehin said prospective investors must demonstrate how their proposed businesses would contribute to increasing insurance penetration and adding value to the existing market.
He said the recapitalisation exercise had encouraged operators and investors to reassess their strategies and seek ways of creating greater value for stakeholders.
On the revocation of Universal Insurance license, Omosehin expressed displeasure over the development, adding that the law did not give NAICOM discretion to extend the deadline for an operator that failed to meet the requirements.
He said Universal Insurance neither met the minimum capital requirement nor submitted evidence of capital raising in progress as of the deadline.
The commissioner said the company later wrote to NAICOM on Aug. 14, seeking an extension to enable it raise capital and sign a Memorandum of Understanding (MoU).
He, however, said the request came after the expiration of the statutory deadline.
Omosehin assured policyholders of Universal Insurance that they will not be allowed to suffer losses following the cancellation of the company’s licence.
Omosehin said policyholders would enjoy priority in the settlement of the company’s liabilities ahead of other creditors.
He assured stakeholders that the liquidation process would be transparent and subject to regulatory oversight.
