why insurance companies declare losses

Mr. Adebayo Adeleke, General Secretary, Independent Shareholders Association of Nigeria (ISAN)

It is obvious that the publicly owned insurance companies have continued to declare losses compared to the privately owned who usually declare profit. Shareholders are eager to know the cause and thereby demand that it should be part of board and management of some of the insurance companies.

They have not been doing well for sometime and they are likely not to do well for sometime to come. We as shareholders have never seen sanctions translate into profitability and distributable profit, with the exception of a handful of them. The problem actually is that NAICOM thinks that it behooves on the shareholders to probe management and make them more accountable forgetting to realise the limitations of shareholders.

Everybody has a role to play, we have delegated our policies to the board and management to run the company and no single shareholder can just work into an established organisation and ask for their books and that is why we have regulators because they can demand or ask for their books at any time to find out how things went. Only the regulators have such powers.

So I believe the regulators may not likely shift the blame of lack of performance and regulatory oversight to shareholders. They exist to ensure that companies in their industry keep to certain set standards and have what it takes to enforce those standards, I don’t think they are doing enough. As a shareholder I can say we have a few insurance companies that delivered returns to shareholders, but the bulk of them have not actually given any reasonable returns to shareholders neither have we seen anything.

We believe that the regulatory authority like NAICOM can do much more to make shareholders take part in the board and management of these companies and probe into their affairs and find out why privately owned insurance companies always declare profit why publicly owned are declaring losses.
We do not have what it takes to make them accountable but the regulators have all the power backed by the strength of law. That is why institution like NAICOM was created and not just for fines and sanctions, they were created in a manner that would make companies accountable for returning profit to shareholders.

Chief Timothy Adeshiyan, President, Nigerian Shareholders Solidarity Association (NSSA)

There is no more fire brigade approach to insurance. In those days when brokers had problem they will rush to insurance companies for cover, but these days, from the beginning you don’t pay your premium you cannot have cover.

The way insurance companies are being managed presently is very good and I will like them to improve on it. We are not saying they should not be regulated but it is over regulation that we are complaining about though the regulation in the insurance sector is highly needed because it will give the insurer (the person who wants to insure) the confidence that when he insures and there is a bubble, then he can have somebody to run to and they too can run to reinsurance companies.

For now I can say insurance companies are being well regulated and are responding to management but some of the companies have not been serious but then you can identify them and some of them are better than it was three years ago.