2015: Apathy Remains Bane Of Insurance Industry Performance

In 2015, the insurance industry continued to grapple with the pig-headed challenge of lethargy, as Pension Industry take steps to attract private sector participation in the Contributory Pension Scheme CHIKA IZUORA writes.

The Insurance industry in its reform process launched the Cooperate Governance Structure and the Anti-Money Laundry Structure in order to remain globally competitive.

It continued to pursue the guidelines on insurance of oil and gas business in Nigeria as a way of ensuring the local content policy of federal government is implemented in the insurance industry.

The industry grasped with issues around insurance education, ignorance, low level of disposable income and even religion that have contributed to the apathy observed towards the sector.

The regulator, the National Insurance Commission (NAICOM) witnessed the coming in of a new commissioner for insurance, Mohammed Kari who took over from Fola Daniel.

Kari on assumption of office promised to continue with the reform exercise of Daniel especially with regard to apathy in the Insurance Industry.

The new commissioner continued to deal with other issues of declining premium as a result of rate cutting, tough regulatory requirements, volatile business environment, liquidity freeze, mounting claims profile in the mist of declining premiums and poor perception of the industry.

Operators made frantic efforts to create awareness and improve Consumer Confidence in Insurance, and at the same time, bring the market closer through microinsurance products.

The Market Development and Restructuring initiative (MDRI) launched in 2009 with objectives of transforming the industry from N160 billion premium income to a trillion Naira industry was a major concern to industry operators as the first phase of the MDRI did not achieve the trillion naira insurance market objective, as the industry’s premium has remained at N339 billion as at 2014.

During the period, some foreign investors that came to the country which included AXA that acquired Mansard continued with their consolidation and expansion drive to improve the Nigeria market and entrenching healthy competition.

The industry mobilized resources to create the necessary awareness and knowledge on Micro insurance and Takaful. However, the sector faced the challenge that the takaful operators face worldwide which is the rating system.

There is yet no scientific method or model for rating risks in takaful insurance, according to one of the operators Godwin Wiggle, chief executive officer of Linkage Assurance.

‘In conventional insurance, there are standard rates for fire, motor, life and other lines of business prepared by actuaries. This is not available in takaful’ Wiggle observed.


In the year under review, the regulation and supervision of the pension industry continued to focus on risk-based examination of licensed pension operators with a view to promote transparency, provide early warning signals as well as encourage pension operators to regularly self-evaluate their positions.

A review of the compliance reports forwarded by Pension Fund Administrators (PFAs) to the National Pension Commission (PenCom), during the first quarter revealed some issues of non-compliance, which included: non-compliance with investment limits by some PFAs; delay in the payment of retirement benefits; receipt of pension contributions without appropriate schedules; unresolved customer complaints; and non-implementation of disaster recovery plans. Subsequently, the Commission conveyed these issues to the concerned operators as well as monitored them in their efforts at resolving the identified issues.

A review of the risk management reports forwarded by the operators showed that some of them faced operational risks associated with receipt of contributions without appropriate schedules; litigations; concentration of portfolio investment; and non-funding of RSAs by employers. The affected operators were subsequently advised by the Commission to strengthen their mitigating measures to avert the identified risks.

The Commission received and reviewed the actuarial valuation reports of seven Defined Benefit Schemes and another report from a scheme sponsor for the year ended 31 December, 2014. A review of the eight reports during the quarterly review revealed that only two of the schemes were under-funded as at the end of the reporting period. Consequently, the affected sponsors were directed to come up with funding arrangements to defray the deficits.

At the beginning of the year, he Commission received and reviewed 23 corporate governance reports from Licensed Operators for the year ended 2014.

The reports indicated some violations of the Code of Corporate Governance by the Operators. The review further showed that some Operators did not evaluate the performance of their Boards, Board Committees and Directors; and held inadequate number of Board meetings as stipulated by the Code. In addition, some Board members did not attend Board and Committee meetings regularly. Subsequently, the affected operators were asked to immediately address the identified issues of non-compliance with the Code of Corporate Governance.

Also, 25 licensed pension operators comprising 14 PFAs, 7 CPFAs and 4 PFCs rendered returns on the Funds under their management/custody and their company accounts to the Commission through the Risk Management Analysis System (RMAS), an electronic return rendition application. A review of the returns showed an increase in the pension assets under the operators’ management.

The Commission scaled up its compliance and enforcement strategies in order to enhance compliance with the provisions of the Pension Reform Act (PRA) 2014. Consequently, sanctions were applied on some operators in line with the Compliance Framework. In addition, the Commission had participated in public enlightenment programmes as well as collaborated with various stakeholders to enhance compliance.

The Commission received a total of 1,330 applications for the transfer of NSITF contributions amounting to N91.68 million. Following the review of the applications, the Commission granted “no objection” to Trustfund Pensions Plc to pay the sum of N82.14 million to 1,200 contributors. This suggested that 130 applications amounting to N9.54 million were rejected due to incomplete documentations.

This brought the total NSITF contributions transferred to RSAs of beneficiaries N9.22 billion. The amount was transferred on behalf of 123,917 NSITF contributors.

The Commission also retained the services of Consultants in order to follow-up and conclude work on the recovery of outstanding pension contributions and penalty from defaulting employers. During the first quarter, the sum of N540.94 million representing principal contributions of N145.85 million and penalty of N395.09 million was recovered. This brought the total recoveries made to date to N6.73 billion.

In the effort to encourage the informal sector participation in the CPS, the Commission developed and distributed the Framework for the informal sector participation in the CPS to all stakeholders for comments. The inputs from various stakeholders have been collated and subsequently incorporated into the Framework. Consequent upon this, the Commission commenced work on the Guidelines and other modalities that would facilitate the participation of the informal sector in the Scheme.

The Commission toward the end of the year intensified its sensitization program on the Pension Reform Act 2014, across the country.


Source: Leadership News