Nigeria
Publication of Financial Sector Assessment Program Documentation––Detailed Assessment of Observance of Insurance Core Principles
Author:
International Monetary Fund. African Dept.
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Publication Date:
28 May 2013
eISBN:
9781484340882
Language:
English
Keywords:
ISCR; CR; risk management; line of business; contingency reserve; NAICOM approval; board-level enterprise risk management committee; accounting year
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Nigeria undertook a Financial Sector Assessment Program (FSAP), which included a review of the structure of Nigeria’s insurance market and the supervisory framework. The assessment was benchmarked against the Insurance Core Principles (ICPs) issued by the International Association of Insurance Supervisors (IAISs). It is advised that the National Insurance Commission (NAICOM) of Nigeria can expand the objective to include the creation of a fair, safe, and stable insurance sector for the benefit and protection of policyholders.

Abstract

Nigeria undertook a Financial Sector Assessment Program (FSAP), which included a review of the structure of Nigeria’s insurance market and the supervisory framework. The assessment was benchmarked against the Insurance Core Principles (ICPs) issued by the International Association of Insurance Supervisors (IAISs). It is advised that the National Insurance Commission (NAICOM) of Nigeria can expand the objective to include the creation of a fair, safe, and stable insurance sector for the benefit and protection of policyholders.

I. Key Findings and Recommendations

A. Introduction

14. This assessment provides an update on the significant regulatory and supervisory development in the Nigerian insurance sector since 2001. Nigeria undertook an initial Financial Sector Assessment Program (FSAP) in December 2001, which included a review of the structure of Nigeria’s insurance market and the supervisory framework and approach. Nigeria has also undertaken reviews of its observance of international accounting and auditing standards (2004 and 2011), and corporate governance (2008).

15. The Nigerian authorities have taken steps to address a number of weaknesses identified in the 2001 FSAP. The insurance industry has gone through a significant consolidation, resulting in a decline of number of insurers and reinsurers from 118 in 2001 to 61 in 2012. Further market restructuring is expected as a result of a November 2010 banking regulation requiring all banks to divest non-banking business, including insurance and insurance broking, by April 2012. A new Insurance Act came into effect in 2003, supplemented by recapitalization guidelines in 2005, Code of Good Corporate Governance (CGCG) in 2009, Operational Guidelines in 2011 for insurers, reinsurers and intermediaries, and anti-money laundering (AML) regulations, know-your-clients (KYC) procedures and risk management guidelines in 2012. Insurers are required to adopt the International Financial Reporting Standards (IFRS) from 2012.

16. The current assessment was conducted by Dr. Rodolfo Wehrhahn, staff of the International Monetary Fund (IMF) and Mrs. Mimi Ho, Insurance Supervision Advisor contracted by the IMF, during September 9–19, 2012.

B. Information and Methodology Used for Assessment

17. The assessment was benchmarked against the Insurance Core Principles (ICPs) issued by the International Association of Insurance Supervisors (IAIS) in October 2011. The ICPs apply to all insurers whether private or government-controlled. Specific principles apply to the supervision of intermediaries. The ICPs are presented according to a hierarchy of supervisory material:

  • a) ICP statements are the highest level and prescribe the essential elements that must be met in order to achieve observance.

  • b) Standards which are linked to specific ICP statements and set out key high level requirements that are fundamental to the implementation of the ICP statement.

  • c) Guidance material provides detail on how to implement an ICP statement or standard.

18. The rating reflects the level of observance for each ICP in the regulatory and supervisory approach with due regard to proportionality. Each ICP is rated in terms of the level of observance as follows:

  • Observed: where all the standards are observed except for those that are considered not applicable. For a standard to be considered observed, the supervisor must have the legal authority to perform its duties and must exercise this authority to a satisfactory level.

  • Largely observed: where only minor shortcomings exist, which do not raise any concerns about the authorities’ ability to achieve full observance.

  • Partly observed: where, despite progress, the shortcomings are sufficient to raise doubts about the authorities’ ability to achieve observance.

  • Not observed: where no substantive progress toward observance has been achieved.

  • Not Applicable: when the standards are considered to be not applicable.

19. The assessment is based solely on the laws, regulations and other supervisory requirements and practices that are in place at the time of the assessment. Ongoing regulatory initiatives, such as proposed legislation, are noted by way of additional comments. The authorities provided a comprehensive self-assessment and other pertinent information such as reports, studies, public statements, websites, and guidelines. The assessors also met a number of Nigerian insurers, industry associations and other stakeholders.

20. The assessors are grateful to the authorities for their full cooperation, thoughtful logistical arrangements and coordination of various meetings with insurers and industry associations. In-depth discussions with and briefings by officials from NAICOM facilitated a robust and meaningful assessment of the Nigerian regulatory and supervisory regime for the insurance sector.

C. Overview—Institutional and Market Structure

Institutional framework and arrangements

21. The insurance activity is regulated by two main Acts and supervised by NAICOM. The Insurance Act, No. 1 of 2003 (IA) governs the licensing and the operation of insurers, reinsurers, intermediaries and other providers of related services. The IA superseded the Insurance Decree, No. 2 of 1997. Insurers must be established as limited liabilities companies under the Companies and Allied Matters Act, 1990, with the exception of the National Insurance Corporation of Nigeria (NICON) and Nigeria Reinsurance Corporation. The National Insurance Commission Decree, No. 1 of 1997 (NA) established NAICOM as the supervisory institution with power of inspection, remedial and enforcement actions, and composition of fines. The Governing Board of NAICOM comprises 11 individuals representing public interest and relevant public and professional entities. Functions of NAICOM include licensing; approval of premium rates, commission rates and policy terms and conditions; and protect policyholders and beneficiaries to insurance contracts.

22. NAICOM is funded by industry levy and government grants, 30 percent of which is earmarked for upgrading industry capacity and 20 percent earmarked for industry development and compensation. Approximately 20 percent of NAICOM’s revenue is from the federal government (before transfers to the earmarked funds), and the remaining from (a) 1 percent levy on premiums, commissions and fees, (b) fees and penalties, (c) investment income, and (d) gifts and endowments. The earmarked education fund provides funding to insurance educational institutions, while the development fund finances initiatives to develop the insurance market and provide compensation to consumers.

23. NAICOM has strengthened its supervision and enforcement efforts. In the past five years, NAICOM has stepped up its vigilance in ensuring the accuracy of financial information and enforcing compliance. To give effect to the requirements in the IA, NAICOM has issued a number of code and guidelines on minimum capital, risk management, operations, corporate governance, AML and KYC. It has also mandated the adoption of IFRS from 2012. It has drawn up a roadmap to move toward a risk-based supervisory regime by the end of 2013.

24. NAICOM launched a three-year market development plan in August 2009 to increase market capacity, improve market efficiency and increase consumer protection. The Market Development and Restructuring Initiative (MDRI) aims to deepen and grow the insurance market by focusing on four issues:

  • Enforcement of compulsory insurance.3

  • Sanitization and modernization of insurance agency system.

  • Wiping-out of fake insurance institutions.

  • Introduction of risk-based supervision.

To create public awareness of the compulsory insurance, NAICOM has conducted several road shows in three geo-political zones in the north-west, north-east and south-west, and distributed several free factsheets and leaflets to the public. While MDRI has not achieved its target premium level of ₦1 trillion in 2012, it has made progress in addressing each of the issues.

25. Improvements have been made to the mandatory motor third party liability with the introduction of a safety net. A Motor Accident Victims Insurance Compensation Scheme (MAVICS) was launched by NAICOM in 2008, providing compensation of third parties permanently disabled or killed by uninsured or unidentified vehicles. MAVICS is funded by the security and development fund.

Market structure and industry performance

26. The insurance sector is an underdeveloped part of the Nigerian financial sector with less than 2 percent of GDP in assets. Assets of the life business are about half of the assets of the non-life sector reflecting a low level of savings and investment insurance products (see Table 1). In terms of gross written premium, the total sector grew at an average rate of 23 percent from 2001 to 20104 but remains very small with a total premium income of ₦192 billion, representing 0.7 percent of GDP in 2010. The gross written premium is estimated to be ₦232 billion in 2011 (see Table 2).

Table 1.

Nigeria: Total Assets of Insurance Firms, 2006–11

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Source: NAICOM.
Table 2.

Nigeria: Gross Written Premium, 2007-2011

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Source: NAICOM. 2011 provisional numbers.

27. The substantial increase in the minimum capital requirements in 2007 led to a reduction in the number of insurers from 104 to 60 in 2008. Currently, the industry is served by 32 non-life insurers, 17 life insurers, 10 composite insurers and two reinsurers. There are 1,737 registered agents, 542 brokers (excluding 32 suspended brokers) and 48 loss adjusters. Further market consolidation, albeit at a lower scale, is expected in the coming months as a result of the banking regulation that required banks to divest their non-banking activities including insurance by April 2012.

28. Non-life insurance is more developed compared with life insurance. The non-life insurance sector is about three times the size of the life insurance sector. In terms of world ranking, the Nigerian non-life insurance industry ranked at 57th and the life insurance industry ranked at 63rd in 2010. All non-life lines of business are offered. Motor, marine and aviation, and property are the dominant lines. Around 70 percent of the life business is the compulsory group life. More sophisticated life products such as critical illness or inflation-indexed benefits are not readily available.

Figure 1.
Figure 1.

Nigeria: Distribution of Non-life Business

Citation: IMF Staff Country Reports 2013, 145; 10.5089/9781484340882.002.A001

Source: NAICOM, and Axco Global Statistics.
Figure 2.
Figure 2.

Nigeria: Distribution of Life Business

Citation: IMF Staff Country Reports 2013, 145; 10.5089/9781484340882.002.A001

Source: NAICOM, and Axco Global Statistics.

29. Insurance penetration is very low. Non-life insurance penetration is around one-half percent, or only one-seventh of the average penetration of the OECD countries in 2010. Life insurance penetration is even lower at around 0.2 percent. This comparison does not improve when a better measurement of insurance utilization is used, which takes into consideration dependence on the economic development of the country as well as the benchmarked insurance penetration against the world insurance penetration average (BMIP) for the non-life sector. The Nigerian BMIP value indicates that the insurance industry is underdeveloped with only 43 percent of the world average insurance penetration at the Nigerian 2010 GDP per capita level, placing Nigeria at the bottom of comparable countries, with the exception of Egypt.

Table 3.

Nigeria: Non-life Insurance Development Metrics in 2010

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Source: Sigma and IMF staff calculations. BMIP is the insurance penetration benchmarked against the world average insurance penetration. The benchmark was developed by the average of the world insurance penetration calculated using data from 1980 to 2006 for 95 countries.

Regulation limits foreign ownership of insurers to 40 percent, but that limit appears to be flexible. The table below indicates foreign ownership above the 40 percent limit.

Table 4.

Nigeria: Foreign Ownership of Insurers in 2010

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Source: NAICOM.

30. Government ownership has gone down but it remains in agriculture insurance. Following its policy of privatization and commercialization of public enterprises, the federal government has reduced its holdings in NICON Insurance and Nigeria Re from 100 percent down to a minority shareholding. However, the federal government still owns 100 percent of Nigerian Agricultural Insurance Corporation.

31. Minimum capital requirements are high compared with other developing countries. NAICOM has drastically raised the minimum capital in 2007 to eliminate unprofitable and insolvent insurers. For example, the minimum capital for non-life insurers was raised from ₦200 million to ₦3 billion. Countries under a Solvency I regime usually require for insurers a minimum capital between US$4 and 10 million. Current Nigerian minimum capital requirements are as follows:

  • Non-life companies: ₦3 billion (US$19.14 million).

  • Life companies: ₦2 billion (US$12.76 million).

  • Composite companies: ₦5 billion (US$31.9 million).

  • Reinsurance companies: ₦10 billion (US$63.8 million).

  • Brokers are not required to have a minimum capital.

32. The solvency regime and the technical reserve requirements need to be upgraded to reflect the nature of risks. Assets for solvency purposes are on “admissible” basis, excluding unpaid premiums, intangible assets, foreign investments and investments in excess of prescribed investments limits. Technical provisions for non-life business comprise estimated unexpired risk, outstanding claims and 10 percent of outstanding claims as incurred but not reported claims (IBNR). Technical provisions for life business are the amounts certified by the actuary as sufficient. Non-life insurers are required to keep a minimum solvency margin (that is, admissible assets less liabilities) of 15 percent of net premium, but not less than the minimum paid-up capital. There is no solvency margin requirement for life business.

33. The non-life insurance market is competitive, with only two companies having market shares of over 5 percent. Leadway and Custodian and Allied each having a market share close to 10 percent by gross written premium are followed by eight insurers each having similar market shares below 5 percent. The top 10 insurers account for 50 percent of the market.

Table 5.

Nigeria: Market Share of the Top Five and Ten Non-life Insurers, 2006–2010

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Source: NAICOM.
Table 6.

Nigeria: Market Share of the Top Ten Non-life Insurers, 2010

(In ₦ Million)

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Source: NAICOM.

34. The life insurance market is dominated by one insurer holding around 20 percent market share. AIICO, a locally owned public company, holds around 20 percent market share. The next nine largest life insurers account for another 50 percent of the market.

Table 7.

Nigeria: Market Share of the Top Five and Ten Life Insurers, 2006–2010

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Source: NAICOM.
Table 8.

Nigeria: Market Share of the Top Ten Life Insurers, 2010

(In ₦ Million)

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Source: NAICOM.

35. Reinsurance is influenced by market development considerations, at the cost of possible knowledge transfer. Direct insurers are required to retain at least 5 percent of the risks to discourage fronting of business (Tables 9 and 10). Reinsurance with foreign reinsurers requires NAICOM approval, subject to demonstrating that the insurer has exhausted local reinsurance capacity. Foreign reinsurers must have a minimum financial strength rating of A- (Standard and Poor’s) or A (A.M. Best). There are two locally licensed reinsurers, along with a representative office of a regional reinsurance company and Africa Re, neither of which are subject to NAICOM supervision. Insurers must satisfy the mandatory 5 percent cession to Africa Re before they seek coverage with other reinsurers. 70 percent of the oil and gas business must be retained in Nigeria and 100 percent for life business. As foreign reinsurers often provide product development and technical know-how to domestic direct insurers, the restriction of reinsurance with foreign reinsurers limits the knowledge transfer opportunities.

Table 9.

Nigeria: Level of Retention of the Non-life Insurers, 2010

(In Percent)

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Source: Axco Global Statistics.
Table 10.

Nigeria: Level of Retention of the Life Insurers, 2006-2010

(In Percent)

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Source: Axco Global Statistics.

36. Both life and non-life companies have similar investment portfolios. The asset composition of insurers as indicated in Table 11 consists of short-term money market and bank deposits (43 percent for non-life and 34 percent for life), stock and private debentures accounting (25 percent for non-life and 22 percent for life) and the remaining investment are distributed among real estate, loans and government paper. The need for liquid assets reflects the short duration of the existing liabilities in both non-life and life, which is group life dominated with little long term individual life business. As the occupational pension system matures an increment in annuities is expected that will require long term investment instruments that currently are not readily available.

Table 11.

Nigeria: Asset Mix of Insurers’ Investments, 2011

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Source: NAICOM.

D. Preconditions for Effective Insurance Supervision

37. Nigeria is a highly densely populated country with a petroleum-based economy. With 162 million people, Nigeria is the seventh most populous country in the world, and the largest in Africa. Nigeria’s GDP of US$169 billion (2009) is the 41st highest in the world, and the second highest in Africa. A member of the Organization of Petroleum Exporting Countries (OPEC), Nigeria is the world’s eighth largest oil producer and sixth largest oil exporter. It has the world’s sixth largest deposits of natural gas. However, it’s per capital GDP of US$2,600 (PPP basis, 2011 estimate) is behind Ghana (US$3,100) and Sudan (US$3,000).5 Life expectancy of Nigerians is 51 years, and 55 percent of Nigerians live below the poverty line.6 70 percent of Nigeria’s labor force is engaged in agriculture, which accounts for 35 percent of GDP. Petroleum and petroleum products account for 95 percent of exports. Inflation was 13.8 percent in 2010 and 10.7 percent in 2011.

38. The legal and judiciary system is British in origin. Nigeria operates a federal political structure under the Constitution of the Federal Republic of Nigeria of 1999. The Federation consists of 36 States and a Federal Capital Territory. The constitution vests the legislative, executive and judicial powers in the National Assembly, the Executive and the courts established there under, respectively. The powers of the States are vested in similar bodies, except that the legislative body of the States is known as the House of Assembly. The development of the Nigerian legal system has been greatly influenced by its colonial past as a part of the British Commonwealth. The common law of England, the doctrines of equity as well as statutes of general application in force in England as at January 1, 1900 form an integral part of Nigerian laws in addition to certain English statutes that have been incorporated through local legislation. The principles of judicial precedent and hierarchy of courts is also a fundamental part of the legal system with the Supreme Court of Nigeria at the apex of the court system.

39. The Financial Reporting Council (FRC) sets the accounting and auditing standards for Nigeria. NAICOM is a member of the FRC and sits on the board. The FRC has adopted IFRS and NAICOM has required insurers to adopt IFRS in their financial reporting from 2012. All Big Four accounting firms have presence in Nigeria, as well as other international and local firms.

40. Under Nigerian Law, Auditors are appointed by a special resolution passed at an Annual General Meeting of a company. Persons who are entitled to be appointed as external auditors are accountants licensed by either the Institute of Chartered Accountants of Nigeria (ICAN) or members of the Association of National Accountants of Nigeria (ANAN). The Report on the Observance of Standards and Codes (ROSC) on Nigerian accounting and auditing practices issued in June 2011 found that there has been limited implementation of the 2004 Country Action Plan and limited improvement in financial reporting practices in Nigeria. The ROSC opined that the weaknesses in financial reporting, auditing and accounting contributed to Nigeria’s banking sector crisis. NAICOM has mandated the adoption of IFRS from January 1, 2012. The effectiveness is yet to be seen.

41. There are few professional qualified actuaries working in Nigeria. The use of actuarial valuation is not mandatory for non-life insurers and it is only required every three years for life insurers. The low demand for external actuaries is covered by one actuarial firm. The leading institution in Nigeria offering an actuarial science degree program is the University of Lagos, Lagos, Nigeria. The institution has been providing a bachelor degree program for many decades. There is a local actuarial society called the Nigerian Actuarial Society which, like the University, has been in existence for more than two decades. The Actuarial society is affiliated to the International Actuarial Association (not a full member), however it has not been very active in promoting development of the profession and further education of the local actuaries and does not provide accreditation. Currently only five professionals working in Nigeria are fellows of foreign actuarial associations. The introduction of IFRS is creating demand for actuaries that currently the country cannot provide.

42. Some protection for claims against insolvent insurers is in place. The Insurance Act allows a portion of the levies collected from insurance institutions to be used for payment of any claims admitted by an insurance company where such claims remain unpaid by reason of insolvency or cancellation of the insurer’s license. MAVICS provides compensation to individuals injured or killed by uninsured or unidentified drivers. Also, when an insurer is licensed, it must deposit 50 percent of the minimum capital with the CBN, which does add an element of policyholder protection in the event of non-payment of claims or insolvency.

43. There is a need to develop investment instruments of medium to long durations. The insurers have access to the Nigerian Stock Exchange and there is also a money market infrastructure. While these are sufficient to meet current short term insurance liabilities there will be a need for longer-term investment instruments that currently do not exist, as the annuities and long term insurance markets develop. Types of instruments available include treasury bills, treasury certificates, certificate of deposits, commercial papers, shares, bonds of federal and state governments and companies, and unit trusts.

E. Main Findings

44. The legal status of guidelines issued by NAICOM should be clarified. NAICOM has the power under the law to make regulations and issue guidelines. The issuance of regulations is subject to the minister’s approval while the issuance of guidelines is not. NAICOM has issued a number of significant prudential requirements in the form of guidelines, such as minimum capital, technical provisions; investment limits and risk management, although the AML/CFT requirements were issued in the form of regulations. NAICOM has taken the position that guidelines have the force of law, on par with regulations. The position has not yet been tested in courts. While the insurers have thus far complied with guidelines when prompted, it is nevertheless important to have legal certainty.

45. Prudential and solvency requirements should be updated to better reflect the risk profile of the operations. Technical provisions and solvency margins are factor-based without regard to the nature of risks. The basis of estimating liabilities is left to the insurers or actuaries in the case of life business. The regime is in urgent need of revamping to become commensurate with the intended move toward a risk-based supervision framework.

46. Poor accounting and auditing practices result in supervisors spending too much time in verifying the accuracy of financial data. Supervisors spend more time verifying data than analyzing data. This not only hinders effective supervision, but also timely disclosure of information to policyholders and the market in general. NAICOM should collaborate with the FRC to improve the reliability of the audited financial statements so that supervisors are able to focus more on both quantitative analysis and qualitative aspects of supervision. NAICOM should also take insurers and directors to task for submitting inaccurate information to promote proper corporate governance.

47. NAICOM has put in a lot of effort to improve the regulatory environment in the past five years. Following the recapitalization of insurers and reinsurers in 2007 to weed out unprofitable and insolvent companies, NAICOM has diligently upgraded its regulatory requirements, including a voluntary code on corporate governance, operational guidelines, risk management framework, KYC and AML/CFT requirements, and adoption of IFRS. These initiatives will significantly improve the regulatory environment for the industry when the industry has fully implemented these requirements. A critical success factor is to provide NAICOM officers with the necessary technical knowledge and supervisory skills suitable for the new regime.

48. Given the existing premium volume, the high capital requirements present a challenge to the attractiveness of the sector. Except for the largest insurers, the return on equity is low as a result of low premium volume and high capital base. While the high capital is sensible to ensure professionalism in the industry, there is a need to study the appropriateness of the capital requirement to balance risk, return and development. The minimum paid-up capital should be evaluated when introducing risk-based capital so that capital adequacy will reflect the risks that the insurer takes on.

49. Several insurers are in urgent need to evaluate their business viability. Some insurers need capital injection to comply with solvency requirements. Few insurers have made profits for 2011 according the unofficial numbers available to NAICOM as of September 2012. The drop in stock prices of over 60 percent since 2007 has affected investments in the insurance sector resulting in several publicly traded insurers losing all share premia and are currently trading at nominal value or the minimal share value required for listing, as indicated in Table 12.

Table 12.

Nigeria: Market Capitalization of Listed Insurers, July 2012

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Source: Nigerian Stock Exchange.

50. Government policy is actively addressing the need for growth of the sector; however enforcement of compulsory insurance is suboptimal. There are six classes of compulsory insurance but enforcement is weak. More effective enforcement will provide a substantial stable premium income for the industry. NAICOM recognizes this and has been working with other relevant authorities to strengthen enforcement. Under this initiative, a motor insurance database will be launched in the coming months, aiming to stamp out rampant fake motor insurance certificates, by providing a quick and easy way for the enforcement agency and customers to verify the authenticity of insurance certificates.

51. Consumer protection needs to be treated with high priority. As the compulsory insurance is enforced, the cost of intermediation of compulsory insurance and the purchase of retirement annuities need to be addressed to improve efficiency of the market. NAICOM should improve the disclosure standards, requiring intermediaries to disclose their capacity to act (whether as agent or broker), their financial interest in the policy, and any conflict of interest that might affect their recommendation of products. For annuities, electronic bidding models like the one existing in Chile would benefit the annuitants by enhanced cost transparency and reducing intermediation costs.

Table 13.

Nigeria: Summary of Observance of the Insurance Core Principles

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Summary of Observance Level

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F. Recommendations and the Authorities’ Responses

Recommendation to improve observance of ICPs

Table 14.

Nigeria: Recommendations to Improve Observance of ICPs

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Authorities’ Response to the Assessment

NAICOM appreciates the work performed by the IMF to prepare this FSAP and are grateful for being given the opportunity to comment on the findings.

NAICOM essentially agrees with the recommendations made, some of which actually backs up existing efforts NAICOM has undertaken so far to strengthen insurance supervision.

The IMF assessment concludes that “NAICOM has made a lot of effort over the past five years to improve the regulatory environment.” NAICOM welcomes the recognition of the efforts made in particular efforts in our vigilance in ensuring the accuracy of financial information and enforcing compliance according to international best practices.

NAICOM have an ambitious agenda to continue to introduce new regulation and tools to keep improving the supervisory action, making it more efficient and adapted to the current economic environment.

A new insurance bill which has been under preparation for some time and which will soon be proceeding through the legislative process, would substantially address most of the issues raised in the assessment.

The IMF assessment team noted that ICP 18, 19, 20, and 21 are only “Partly observed” because of issues relating to intermediaries disclosure of capacity, outstanding premiums, customer fair treatment and timely dissemination of information for public disclosure. These issues are being addressed; there is a draft guideline on market code of conduct code and another draft guideline on claims and complaints procedure. IFRS transition has also commenced since the beginning of this year and will address many public disclosure areas.

The Road Map and ongoing works to transit to Risk Based Supervision and Risk Based Capital will also tackle some of the other concerns raised in the assessment.

Some improvements have already been achieved in our HR strategy, through the hiring of staff and professionals from the private sector with industry experience. These efforts will continue; and they will be further supported by on-going plans to develop a robust IT infrastructure. This development will enable full data storage capabilities and enhanced automation of financial data and financial analysis.

The recommendations of the IMF are therefore well received and NAICOM will continue to work towards their progressive implementation in the continuous efforts for strengthening insurance supervision.

II. Detailed Assessment

Table 15.

Nigeria: Detailed Assessment of Observance of the Insurance Core Principles

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1

1 USD$ = 157.5 ₦ as at August 25, 2012.

2

At the date of the assessment, the divesture was largely completed, except one or two banks that require additional time to restructure. However, new statistics are not yet available post-divesture.

3

There are six compulsory insurance coverages under various legislations. They are:

  1. Group life insurance in line with the Pencom Act 2004

  2. Employers liability in line with the Workmen’s Compensation Act 1987

  3. Buildings under construction - Section 64 of the Insurance Act 2003

  4. Occupiers liability insurance - Section 65 of the Insurance Act 2003

  5. Motor third party insurance - Section 68 of the Insurance Act 2003

  6. Health care professional indemnity insurance - under Section 45 of the NHIS Act 1999

4

Source: Nigerian Insurance Association Digest 2011

5

CIA World Fact Book.

6

Data from the World Bank, 2004.

7

For example, the revised minimum paid-up capital requirement contained in a 2005 guideline is in contradiction of the amounts specified in the primary legislation. Without legal certainty of the enforceability of guidelines, insurers could challenge the new capital requirements. In fact, even if the guidelines have the force of law, they cannot contradict the provisions in the primary legislation.

8

NAICOM Act 1997, Section 16 (1) (a).

9

NAICOM Act 1997, Section 16 (1) (f).

10

NAICOM Act 1997, Section 22 (1).

11

NAICOM Act 1997, Section 22 (2).

12

“As an employee of the Commission, staff will acquire certain confidential information relating to trade secrets and/or confidential information of the Commission and that it is fair and reasonably necessary for the protection of the Commission’s business and propriety interest that staff should be restrained from competing with the Commission for the duration of the employment agreement.”

13

  • 408. A company may be wound up by the court if:

    • (a) the company has by special resolution resolved that the company be wound up by the court;

    • (b) default is made in delivering the statutory report to the Commission or in holding the statutory meeting;

    • (c) the number of members is reduced below two;

    • (d) the company is unable to pay its debts; and

    • (e) the court is of opinion that it is just and equitable that the company should be wound up.

  • 409. A Company shall be deemed to be unable to pay its debts if -

    • (a) a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding 2,000 then due has served on the company, by leaving it at its registered office or head office, a demand under his hand requiring the company to pay the sum so due, and the company has for three weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor; or

    • (b) execution or other process issued on a judgment, decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part; or

    • (c) the court, after taking into account any contingent or prospective liability of the company is satisfied that the company is unable to pay its debts.

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Cover IMF Staff Country Reports
Nigeria: Publication of Financial Sector Assessment Program Documentation––Detailed Assessment of Observance of Insurance Core Principles
Author:
International Monetary Fund. African Dept.
Volume/Issue:
Volume 2013: Issue 145
Publisher:
International Monetary Fund
ISBN:
9781484340882
ISSN:
1934-7685
Pages:
65
DOI:
https://doi.org/10.5089/9781484340882.002
Figure 1.

Nigeria: Distribution of Non-life Business
Figure 2.

Nigeria: Distribution of Life Business