Friday, September 17, 2021
More

    Analysts advise NAICOM to Draw Roadmap for Insurance Penetration Rather than Statutory Recapitalisation

    Must read

    Naija247news Editorial Teamhttps://www.naija247news.com/
    Naija247news is an investigative news platform that tracks news on Nigerian Economy, Business, Politics, Financial and Africa and Global Economy.

    By Ebere Nwoji

    The National Insurance Commission (NAICOM) has been advised to draw a roadmap for deep penetration of insurance across Nigeria and to embrace the policy of self-recapitalisation among insurance sector operators rather than its current regulatory and statutory based recapitalisation.

    A Lagos based Legal practitioner and National Coordinator, Cogatla Group of Lawyers, Chijioke Ndubuisi, gave the advise to the commission in a statement made available to THISDAY.

    In his view, creating Penetration road map for the insurance industry would lead to optimal performance and would engineer growth rather than concentration on forceful recapitalisation in the face of the prevailing hostile economic environment that does not support businesses survival.

    He stated, “Businesses on ground in the country as at today cannot support the insurance industries as they are not viable at all.

    The situation in stock exchange with respect to insurance stock is pitiable as the value is nothing to write home about.

    “It is less than one percent. Government is the largest supporter of insurance companies in Nigeria, although 85 percent of Gross Domestic Product (GDP) comes from private sector, unfortunately, private sector is weak, a situation caused by ravaging poverty, insecurity, inflation and general decline in the economy.”

    Against this backdrop, Ndubuisi, suggested that what would be more beneficial to the industry at this critical time was for the commission and the operators to evolve ways and means to make insurance services penetrate the public and encourage Nigerian business community to see investment into the industry as business worth venturing into.

    He noted that insurance awareness was still at its low ebb as he called the on federal government to stop the labeling and tagging of Nigeria a war and risk prone zone that calls for imposition of higher insurance premium.

    The Lagos lawyer, further urged government to remove other impediments on the way of the insurance operators.

    He pointed out that the planned compulsory recapitalisation exercise as a policy that should be set aside for now while encouraging deep penetration of insurance to the public.

    He insisted that it was necessary to set aside the recapitalisation exercise for now because Nigeria’s economy by all parameter of measurement was not at its best, as such, compelling the insurers to go out and get the required compulsory capital would spell the demise of many firms.

    “Undoubtedly, Nigeria’s economy is in a serious quagmire and almost comatose, embroiled in recession upon recession and burdened by heavy debts, hyperinflation, internal insecurity, shaky and highly hemorrhaging with the government clueless about how to end the mess. It seems as if it has defied all economic logic, courtesy of former Military Head of State, Ibrahim Babangida.

    “According to HSBC, the Nigeria’s economy is not growing and IMF declared recently that Nigeria’s economy is under performing.

    Poverty is seriously ravaging the country and according to report released by National Bureau of Statistics (NBS) the number of Nigerians who are poor was estimated to be 82.9 million in May, 2020 and the forecast has it that the National poverty rate is likely to jump from 40.1 percent in 2019 to 45.2 percent in 2022 implying that 100.9 million out of 200 million Nigerians will be living in poverty by 2022, “he said.

    He noted that due to the harsh operating environment, most industries are relocating from Nigeria to other neighbouring countries due to insecurity, government oppressive business environment and policies, various threats to business operations, plus other impediments.

    He said this being the true picture of Nigeria’s economy, has raised the question among insurance industry observers on, “what proper role would insurance industry play to assist the prostrate economy through improved GDP? How can the insurance industry be strengthened to better contribute effectively and positively through risk bearing and underwriting and not ceding majority of risks to foreign underwriters for the growth of their industry and their own country’s economy?”

    He cautioned that although, in South Africa, the capital base for insurance is $8 billion equivalent of South African’s Rand – 288,069, 397.76R for life while general and composite business was $10 billion equivalent of South African’s Rand – 360,270, 200.00R respectively.

    “Reinsurance Capital base $20 billion, its equivalent being 720,557,941.60Rand as at May 2020. The situation in Ghana was slightly different in that for Life Insurance, the capital base was $8 billion, it’s equivalent being 116,063.18 Ghana Cedi while General and Composite was pegged at $10 billion, equivalent of Ghana Cedi 145,329,412.60 respectively.

    Reinsurance Capital base in Ghana was N18 billion equivalent of Ghana’s Cedi 261, 592, 942 .68, Nigeria should not copy what is obtained in these countries, “he revealed.

    In his view, NAICOM, may have borrowed a leaf from these countries to attempt to raise Nigerian insurance industry capital from the present level of N3billion to N10 billion for General business, N2billion to N8billion for life, N5 billion to N18 billion for composite firms and N10 billion to N25 billion for reinsurers, “it should be noted that South African and Ghana economies were different from Nigeria as the former were more progressive and their Gross Domestic Product (GDP) far higher and better than that of Nigeria.

    “Be that as it may, any attempt on the part of the regulators to sheepishly follow the bench mark of insurance in both countries without looking deeply into our own environment and business practices might lead to collapse of so many insurance firms and in turn affect the economy adversely.”

    - Advertisement -spot_img

    More articles

    - Advertisement -spot_img

    Latest article

    WP to LinkedIn Auto Publish Powered By : XYZScripts.com