The National Insurance Commission (NAICOM) has threatened to sanction insurance operators that contravene local content policy by ceding businesses offshore, without fully utilising local capacities.
The commission disclosed this in a circular titled ‘Utilisation of In-Country Capacities of Nigerian Insurers, Reinsurers and Pool Prior to Foreign Facultative Reinsurance, signed by its Director, Authourisation and Policy, Pius Agboola, sent to all insurance institutions.
According to NAICOM, it has observed that insurance practitioners now fail, neglect or refuse to consider and fully utilise relevant in-country capacities of insurance/reinsurance institutions such as; pools, reinsurers and other approved local/recognised insurance capacities prior to applying for approval to cede certain proportion of some risks offshore.
It maintained that in some situations where the pools, insurers, or reinsurers are offered participation, the institutions either offered minimal proportion below their capacity or informally restricted and/or compelled to accept lower than their respective capacities for the purpose of justifying cession of the risks offshore.
NAICOM noted that the unethical practice, which contravenes the local content law, henceforth, would not be tolerated.
It also cautioned operators who, according to the commission, have inappropriately arrogated to themselves the authority to unilaterally exclude some insurers in juicy businesses over alleged outstanding claims, urging them to desist from such act and report alleged non-settlement of claims to the statutory grievance/complaint redress mechanism for appropriate action.
The local content initiative was introduced by the federal government in Nigerian insurance industry in 2007.
Its introduction was as a result high rate of capital flight from the oil and gas sector to overseas insurers. Therefore, in a bid to stem this trend, the federal government in 2007, introduced the local content initiative.
In addition to this, NAICOM in 2010, released the oil and gas insurance guidelines and clarified conditions for taking any business abroad.
One f the conditions is that any organisation or person wishing to take any business abroad must first feed the local insurers with such business after which it must obtain NAICOM’s approval to take the excess abroad.