Kelvin Egerue
15 July 2008
Insurance — There were strong indications last weekend that the National Insurance Commission (NAICOM) may again turn the searchlight on insurance companies nationwide as the regulatory body embarks on fresh verifications exercise.
The second-round verification of the status and health of insurance companies is coming barely 10 months after NAICOM in November last year cleared 49 underwriting firms and one reinsurer as fit and proper to continue in business following their successful recapitalization.
But in a swift reaction, the Commissioner for Insurance, Mr. Fola Daniel, denied any moves to investigate the recapitalization status of companies. He had told Daily Champion in a telephone interview that the regulatory authority was to conduct what he described as "routine inspection akin to what obtains in the banking sector."
The commissioner explained that the routine inspection ought to have been flagged off six months after the conclusion of the recapitalization project. He disclosed that the regulatory body would commence its inspection of companies next week.
Already, NAICOM, he added, had concluded the training of its field staff in the Lagos zone preparatory to the commencement of the routine inspection. He did not, however, disclose what the inspectors would be looking for in the books of the affected companies.
"It is falsehood that NAICOM is embarking on another round of verification of companies. We are shortly to embark on routine inspection. We have just finished a programme with the staff," the commissioner explained.
He recently revealed plans of the insurance commission to adopt what he described as risk-base regulation as opposed to statutory. He said then that the recently concluded recapitalization exercise of companies might be the last to be conducted by statute as companies would be encouraged to grow their share capital in accordance with their risk exposure.
But industry sources said yesterday that the market was tensed up over the hints of fresh inspection by officials of the insurance commission. A source disclosed that the uneasy calm in the market place might not be unconnected with the suspicion that companies which prosecuted their recapitalization project with borrowed funds might be the target of the verification team.
It would be recalled that the consolidation programme of the insurance sub-sector which started in September 2005 ran into troubled waters mid-way, culminating in prolonged delays in the clearance of successful institutions.
Part of the dark sides of the insurance industry recapitalization exercise was the removal from office of the then Commissioner for Insurance Chief Emmanuel Okechukwu Chukwulozie. While the boards of NICON and Nigeria Reinsurance Corporation were dissolved and interim managements appointed to run the firms, two other companies which felt aggrieved with the NAICOM's stand on their recapitalization status headed to the courts to challenge NAICOM on the issue.
But the new commissioner for insurance Mr. Daniel had declared that the nation's insurance industry is better off with the out come of its recapitalization pointing out that the market is now confidence inspiring.
Daniel, the incumbent commissioner, had assured that NAICOM had no intention of revisiting the outcome of the exercise, insisting that the commission would only maintain its routine inspection.
Mr. Dolapo Balogun, the immediate past chairman of the Nigerian Insurers Association (NIA), the umbrella body of registered insurance firms in the market, had confessed recently that post-consolidation market capitalization had appreciated to the N206 billion from its previous level of N25.9 billion.
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