The Commissioner for Insurance, Mr Sunday Olorundare Thomas, has said that he would this year direct his regulatory attention to migrating the entire insurance sector from compliance based capital supervision to risk based supervision.
Thomas, who stated this in an interview with THISDAY said the era of one cap fits all in his supervisory role was over and had given way to a new era of risk-based capital model of supervision.
“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 industry was committed to his care with market production of about N320 billion, but that between that time and now, the industry’s market production has grown to N730 billion.
He said he was deputy commissioner until around August 2019. When he was appointed acting commissioner, the market production in terms of premium was about N400 to N520 billion. But by 2022, the market recorded more than N730 billion. I am still not satisfied yet, because my target before I finish my first term in office is N1 trillion.
He said 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 also 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 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 want 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 question on increase in premium payable on the Motor Third Party Insurance from N5, 000 to N15,000, Thomas said people talk about increase in the premium but that it was really not an increase.
He added, “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 with respect to movement of people, men and material within the West African coast, which mandates everyone who moves with the sub-region to have an insurance policy.”
According to him, what happened before now was that if anyone was going from Nigeria to Togo, before crossing the border, the person would need to buy the ECOWAS brown card. So, at every point, this brown card must be obtained.
On his regulatory model, he said his administration in NAICOM has put some companies under regulatory order. But said his office would not announce it to avoid panic.