Mr. Sunday Olorundare Thomas, the Commissioner for Insurance, has stated that he will focus this year’s regulatory efforts on transitioning the whole insurance sector from compliance-based capital supervision to risk-based supervision. In an interview today, Thomas remarked that the time of “one cap fits all” in his supervisory job was past and that a new time of “risk-based capital model of supervision” has taken its place.
“It will no longer be the case. This year, we will be closing on that, and before I finish the first tenure, it will be operational. We are in partnership with the multilateral institutions in our quest to evolve this risk-based capital. Our staff members have gone through a lot of training in this area, and it’s been quite helpful,” he said.
Thomas recalled that the sector had been entrusted to his care with a market production of roughly N320 billion, but that it had now increased to N730 billion. He reported that as of about August 2019, when he served as deputy commissioner, the market production in terms of premium was somewhere between N400, and N520 billion when he was named acting commissioner. “However, the market saw growth of almost N730 billion by 2022. Since I have failed to reach my goal of N1 trillion by the end of my first term in office, I am still not content.”
His report also read that the total asset of the industry moved from about N1.3 trillion in 2018 to about N2.5 trillion in 2022. “We are making progress but looking at our economy, these, to me, are small numbers. I will also say that our methodology is changing. Inspection used to be compliance-based with a checklist. But now, the world has moved to risk-based supervision.
“We started that last year. Some companies have tasted what it means to have a risk-based supervision environment. It has been quite revealing about the operations of these institutions. We are taking it to a new level, risk-based capital. If you know the history of capital in this country, it has been an issue, and we want to remove that.
“You can trade, for instance, as a motor third-party insurance company, based on your capital. Then, if you wish to trade in the highly volatile business environment of oil and gas, you also must provide the needed capital to be able to run at that level. That is where we are going now,” Thomas stated.
In his response to a question on the increase in premium payable on the Motor Third-Party Insurance from N5, 000 to N15,000, Thomas said people talk about an increase in the premium but that it was really not an increase.
Expatiating, he said: “When it was put at N5, 000 over 20 years ago, what did it cover? It only covered liability to a third party. As at that time, how much were parts of vehicles being sold? How much were cars being sold? If you want to adequately cover a person, the person must pay adequate premium.
“When the premium was N5, 000, the liability covered was just N1 million but because we are conscious of our environment, we have increased the liability to N3 million. Not only that, before we reviewed the premium, there is a protocol signed by President Muhammadu Buhari I think in 2021, regarding movement of people – men, and material within the West African coast, which mandates everyone who moves within the sub-region to have an insurance policy.”
“Before this time,” he said: “everyone traveling from Nigeria to Togo had to purchase an ECOWAS brown card to enter the border. This brown card must therefore be obtained at every step.”
Regarding his regulatory paradigm, he said that several corporations have been placed under regulatory order by his NAICOM administration. Nevertheless, he declared that to prevent panic, his office will not make the announcement.