The National Insurance Commission has indicated its intention to introduce a new classification policy for the insurance industry as part of its sustained efforts to grow it and improve its contributions to the nation’s Gross Domestic Product (GDP).
The Commissioner for Insurance, Mr Muhammad Kari, gave this hint on Wednesday at an executive breakfast meeting organised by the Society for Corporate Governance Nigeria, in Lagos.
Kari said that the proposed reclassification of insurance entities will be effected on a risk-based system, where the insurers will be strictly restricted to their areas of core competences and capabilities.
The industry regulator in a lecture titled ‘Corporate governance and the Nigerian insurance industry’ explained that the introduction of risk-based classification would help companies to focus on where they have comparative advantage in their operations with the attendant implications for their efficiency, profitability and growth.
Kari said: “We are used to classifying companies with their capital but we are working on the process of introducing risk-based classification, which will try to see what assets or capital can cover.”
It would be recalled that it was widely rumoured early this year that the industry regulator was planning to release new guidelines on recapitalization for insurance companies.
According to sources, the guidelines which will be released before it fully transit to risk-based supervision for all categories of insurance companies, is expected to create a stronger insurance industry that could underwrite large accounts and be globally competitive.
Currently, insurance companies require a minimum of capital base of at least N2 billion for life insurance, N3 billion for non-life insurance, and N5 billion for composite insurance.
The capital base requirement for reinsurance companies operating in the country which came into effect in 2007 is N10 billion.
