As the 2024 Consolidated Insurance Bill awaits the presidential assent anytime soon after going through legislative processes in the both chambers of the National Assembly, 12 licensed composite insurance companies are likely to lose their operating licences, according to the provision of the new Act.
Daily Independent views that with the new law in place, the composite status of these companies will be scrapped while those still planning to run both life and non-life portfolios are expected to split and make them two separate entities with separate boards and managements.
When eventually assented by the president, the new insurance Act will replace the current insurance legislation which has been in operation for over two decades without provisions to address contemporary challenges and foster growth and innovation.
While this lasts, the provision will increase the number of life service providers to 26 from 13 and non-life portfolios by that number to 40.
The Nigerian insurance market currently comprises 13 composite companies, 27 non-life entities, 13 life companies, three reinsurers, eight microinsurance companies and four takaful companies.
The bill also specifies N10 billion for life insurance firms, N15 billion for non-life business and N35 billion for reinsurance companies in the country.
It seeks to regulate the insurance business in Nigeria by consolidating various existing legislations, implying that the 40 life insurance operators will have a total of N260 billion as paid up capital, the non-life companies will also have a total of N600 billion and the three reinsurance firms will pool a total capital base of N105 billion.
Kingsley Miller, the President of Actuarial Society of Nigeria and CEO of Evolutics Technology Limited, noted that separation of Life business from General business has been a thing of debate overtime, according to him, the regulators are keen on seeing the separation depending on what comes out of the Act finally.
“But I can say that the reason they would want to do that is for better management and more focused management, maybe! I think there are advantages and disadvantages of that approach.
“The disadvantage is the synergy that will be lost. So, a company that was operating as a composite breaks up into two companies now, you need two managing directors, two boards, two CFOs and all of that. In a market where the return on capital is already poor now means loading extra expenses on the business.
“The advantages are that Life company boards will be able to ask more specific questions and the non-life will be able to ask more specific questions.
But the issue is whether the market is big enough for that.” Citing what’s obtainable in South Africa where that happens, Miller noted that companies focusing on life and those focusing on non-life are huge and are doing very well.
He asserted that the most successful insurance companies in Nigeria are composites, observing that it’s the old companies that are doing composite while the new entrants are separated.
He posited that allowing the companies to operate the way they want to, whether life, General or composite, does not change anything as their accounts are separated.
The National Insurance Commission (NAICOM), however, sees a brighter future for insurance industry, stressing that the new Insurance Act will unlock the sector’s growth trajectory when finally assented to by President Bola Tinubu.
The commission, in addition, noted that the legislation will unlock the growth, prosperity, and potentials of the insurance sector, adding that its passage has marked a significant milestone in the country’s efforts to revamp the insurance industry after nearly two decades.
Describing it as a game changer for the sector, the commission stated that the insurance law will have high positive impact on the contribution of insurance sector to the country’s gross domestic product (GDP) and economy as a whole.
“By consolidating existing insurance laws, the new legislation marks a new era in the ongoing efforts to strengthen the Nigeria’s insurance industry.
The bill provides a comprehensive framework for regulating all types of insurance businesses and ensuring a more robust and effective industry.
“Passage of the bill marks a significant triumph for Nigeria’s insurance industry, tackling the long-standing challenge of low insurance penetration in the country and addressing the industry’s need for a more robust legal and regulatory framework, enabling it to compete favourably in the African insurance market and globally,” the NAICOM’s statement noted.
The newly passed bill introduces several pivotal provisions aimed at fortifying Nigeria’s insurance industry. Key highlights of the legislation include: Enhanced Capital Requirements: New minimum capital requirements for insurance companies, ensuring they are adequately capitalised to underwrite risks and protect policyholders.
Senator Mukhail Adetokunbo Abiru, the Senate Chairman on Banking, Insurance and Other Financial Institutions, said the Senate aim at creating comprehensive legal foundation that would empower insurers to serve their communities efficiently while at the same time safeguard customers within the tenet of global standards.
“With the Nigeria Insurance Industry Reform Bill, 2024, we aim to create a comprehensive legal foundation that empowers insurers to serve their communities better, safeguard customers, and operate with global standards”, adding, “The new minimum capitalisation is necessitated by several factors, including currency depreciation, provisions in the Finance Act 2022, which redefined the composition of capital, inflation, international competitiveness, AfCFTA competitiveness, capital flight due to over-reliance on foreign insurance, and emerging risks such as cyber insurance and consumer credit insurance.”
Senator Aburi (APC, Lagos East), who presented to the Senate, the Nigerian Insurance Industry Reform Bill, 2024 during plenary said that the bill was passed following the consideration and adoption of the recommendations in the report of the Senate Committee on Banking, Insurance, and Other Financial Institutions on the said Reform Bill.
The passed bill which will repeal the Insurance Act, CAP. 127 Laws of the Federal Republic, 2004 when it becomes a law, consolidates the Marine Insurance Act, 2004; the National Insurance Corporation of Nigeria Act, 2004; and the Nigeria Reinsurance Corporation Act, 2004 and to provide a comprehensive legal and regulatory framework for Nigeria’s insurance businesses and related matters. (Daily Independent)
