The National Insurance Commission has said that about 10 insurance companies are currently facing serious financial issues, which may lead to bankruptcy.
The situation, according to NAICOM, is already making the firms to operate below acceptable standards.
Commissioner for Insurance, Mr. Fola Daniel, said NAICOM had therefore placed the affected companies under close watch to prevent the problem from deteriorating.
He said, “Ten insurance companies are currently under regulatory watch, following observed deficiencies relating to solvency.”
Daniel stated this in a speech he delivered at the House of Representatives public hearing on the issuance sector in Abuja.
However, the speech obtained by our correspondent on Thursday, did not include names of the affected firms.
The commissioner also said that eight other insurance companies had been sanctioned for operational infractions, while 19 companies were penalised for breach of oil and gas insurance guidelines.
The commissioner also said that 38 companies were penalised for failing to submit copies of evidence of their reinsurance arrangements.
The commission also dealt with some companies for infractions relating to submission of audited accounts and financial statements.
Daniel said the guidelines for oil and gas insurance were issued by the commission following the enactment of the Nigeria Oil and Gas Industry Content Development Act 2010 and the commission’s inclusion on the board of the Nigerian Content Monitoring Board.
This, he explained, was to ensure compliance with the insurance aspects of the Local Content Act.
The commission, he added, had convened a workshop where insurance experts from international markets would speak to the local market.
He said, “While 100 per cent compliance may not be feasible given human nature, the compliance level has been reasonable. Nonetheless, the commission imposed sanctions where breaches were observed.”
To give effect to the provisions of the law, Daniel said the commission had issued several guidelines, some of which were operational guidelines for insurers and reinsurers; operational guidelines for intermediaries; code of good corporate governance; and anti-money laundering/combating the financing of terrorism regulations.
Others are guidelines for developing a risk management framework; claims management guidelines (draft); guidelines for oil and gas insurance business; guidelines for the divestment of banks from insurance institutions; and Nigeria insurance industry ICT policy guideline.
The commissioner also stressed the need for mandatory insurance cover for certain assets and liabilities in the country.
He said, “Financial prudence plus international conventions and best practices also make insurance the most cost effective risk transfer mechanism, an attractive tool of management of public finance.”
BY NIKE POPOOLA