Mass Exit of Insurance Sector Directors

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The implementation of Corporate Governance Code by the National Insurance Commission, has resulted in mass exit of non -executive directors of insurance firms , writes Ebere Nwoji

The insurance industry regulator, the National Insurance Commission, (NAICOM) precisely in April this year, made good its bid to commence implementation of the Code of Good Corporate Governance among insurance industry operators in Nigeria.

The Corporate Governance Code was introduced by the commission since February, 2009 shortly after the melt down on global financial system but had not been strictly enforced due to reasons best known to the commission.
But at the second edition of the bi-monthly insurers’ committee meeting held in Lagos, the commission alerted operators on its decision to commence the enforcement of the code.

Corporate governance according to finance experts is the manner in which organisations, particularly limited liability companies are managed and the nature of accountability corporate managers are expected to render to resource owners.

It is also defined as the manner in which companies are directed and controlled. It encompasses the means by which the board and senior management of a company are held accountable and responsible for their actions and includes corporate discipline, transparency, independence, accountability, responsibility, fairness and social responsibility.”
It serves as strategic efforts of NAICOM to rebuild and sustain the waning confidence of stakeholders in insurance industry.

Kari, said one of the main things the commission sets to achieve with the enforcement is to stop the trend in the industry in which the chairman of a company’s board appoints managing Director based on sentiments like biological ties or on friendship basis irrespective of whether he is qualified for the position or not. He said this was one of the causes of poor performance if many insurance firms in the past.

Initially, the announcement of its enforcement by NAICOM seemed as joke to insurance industry operators until the commission began to demonstrate signs of effective take off of the principle with its calculated attempt and determination to ensure that insurance companies comply with the aspect of the code on retirement of insurance companies’ non -executive directors who have put in nine years of service in the board of their various firms.
Enforcement of the code according to reports, saw the exit of about 260 non-executive directors of insurance companies this year.

This will be followed by yet to be disclosed number of executive directors who will also be compelled to quit the various boards of insurance companies in 2017.
This cuts across all the existing insurance and reinsurance firms in the country as THISDAY’s investigation has revealed that few insurance firms that were not affected by the exit of non – executive directors, will definitely be affected by the exit of their executive directors next year.
Those affected are non-executive directors who have sat on their companies’ boards for nine years and executive directors that have sat for ten years.

The Commissioner for Insurance, Mohammed Kari, confirmed this during a courtesy visit to THISDAY Corporate Headquarters early this year, explaining that the commission took the action to enforce the regulations in the code of good corporate governance for the industry.

Section 5.04 (vii) of the 2009 corporate governance code states that “non-executive directors shall not be re-nominated and appointed for more than three terms of three years each.”

Also Mr. Oye Hassan Odukale, Publicity and communication Sub-committee Chairman of the Insurers’ Committee, briefing the media at the end of the second edition of the committee meeting in Lagos said the commission has intimated them with the plan to commence implementation and enforcement of the corporate governance code.

Hassan-Odukale, who is also the Managing Director of Leadway Assurance Ltd, explained that the code was introduced by the commission since 2009 but due to some reasons, the commission has not been too firm in its implementation.
“We had old corporate governance code which was introduced by NAICOM in 2009, but for some reasons, the commission has not been too firm on it but we are told that from April 1, NAICOM is going to enforce it. There are some other codes like the one of last year but NAICOM has agreed that since the Financial Reporting Council (FRC) is coming up with a new code, it will just allow FRC code when it comes out to supersede the present code. So we are given up to April to comply with the 2009 corporate governance code,” he stated.

On their part, insurance industry operators, have no choice than to comply with the code. Some did so grudgingly with emotional pains on the exit of the directors they cherished. Among insurance firms that have so far held their annual general meetings (AGMs) and whose non- executive board members were affected by the code, the following are their comments: SA Insurance Plc whose new Chairman, Johnson Chukwuma, in his statement to shareholders at the 20th AGM of the company stated: “An industry development of significance in the current year 2016 is mandatory corporate governance change ,under NAICOM rules. The regulator has required that non -executive directors of insurance companies that have served up to the maximum length of nine years should vacate board membership. This requirement, led to the painful departure of our immediate past chairman Brigadier General Dominic Oneya (RTD) who occupied that position since December 2014 and has been SA Insurance director since 2005.”

Also, Chairman, NEM Insurance Plc, Chief AdewaleTeluwo, who was personally affected by the code, in his farewell message to chair holders at the 46th Annual General Meeting of the company held in Lagos stated: NAICOM’s code of corporate governance of 2008 which requires that the tenor of non- executive directors should not exceed nine years was implemented this year.