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A PRESENTATION BY NATIONAL INSURANCE COMMISSION AT THE FSRCC MEETING 9 FEBUARY 2012DEVELOPMENTS IN THE INSURANCE INDUSTRY IN NIGERIA

OUTLINEIntroductionInsurance Market SizeNAICOMs strategic goalsDevelopments in the Insurance Industry

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INTRODUCTIONNAICOMThe National Insurance Commission was established in 1997 by the National Insurance Commission Act 1997 with the responsibility of :

ensuring the effective administration, supervision, regulation and control of insurance business in Nigeria

and protection of insurance policyholders, beneficiaries and third parties to insurance contracts.Statutory Mandate4Its functions under the NAICOM Act 1997 are to:establish standards for the conduct of insurance business in Nigeria;approve rates of insurance premiums to be paid in respect of all classes of insurance business;approve rates of commissions to be paid in respect of all classes of insurance business;ensure adequate protection of strategic Government assets and other properties;regulate transactions between insurers and reinsurers in Nigeria and those outside Nigeria;act as adviser to the Federal Government on all insurance related matters;Statutory Mandate (cont)5approve standards, conditions and warranties applicable to all insurance business;protect insurance policy holders and beneficiaries and third parties to insurance contracts;publish, for sale and distribution to the public, annual reports and statistics on the insurance industry;liaise with and advise Federal Ministries, extra ministerial departments, statutory bodies and other Government agencies on all matters relating to insurance contained in any technical agreements to which Nigeria is a signatory;contribute to the educational programmes of the Chartered Insurance Institute of Nigeria and the West African Insurance Institute, and carry out such other activities connected or incidental to its other functions under the 1997 Act.INSURANCE MARKET SIZEA key development in the insurance industry is that the industry is currently generating premium income of almost N250billion. And total assets of N564billion. Although insurance premium to GDP is 1% premium income has been growing at 18% a year and could quadruple over the next 2-3 years with the ongoing market development initiatives. This is with 59 insurance companies 2 reinsurance companies 600 brokers 7000 agents.

GOAL 1: To facilitate deeper market penetration in the insurance industry.

NAICOM's presentation to HMF7ACTION PLANBENEFIT TO THE INDUSTRY AND MARKET

CHALLENGES/ CONSTRAINTSPRESENTSTATUSTIMELINESEnforcing compliance with compulsory insurance; Increase insurance policy protection for individuals Close Insurance Gap Increase Contribution to GDP Increase premium income for insurers and liquidity for payment of claims.Public resistance to insurance.funding of pre- and post enforcement activities/ awarenessOn-going. Market Development and Restructuring Initiative Q3 2011 enforcement commences. Inspecting government assets for insurance coverage; Adequate cover for Government Assets Reduced dependence on government funds in the event of losses.Inadequate budgetary provision for insurance premium by governmentExtent of cover currently being reviewedQ3 2011Eradicating fake insurance agents and forged policies from the market;

Public hold genuine policy for which they can be paid claims.Resistance to enforcementDefining our requirementQ4 2011Facilitating financial inclusion through micro insurance and Takaful.

Suitable policy to meet needs of all including the poor and vulnerable.Poor standard of living toward purchase of insurance

Stakeholder discussionsQ4 2011

GOAL 2: To manage stakeholders expectation in order to ensure transparency and public confidence.NAICOM's presentation to HMF8ACTION PLANBENEFIT TO THE INDUSTRY AND MARKET

CHALLENGES/ CONSTRAINTSPRESENTSTATUSTIMELINESCConduct reviews in all insurance companies on claims payment and complaints handling.

All genuine claims are paid in a timely fashion No unjustified delay or rejection of claims.Public has more trust and confidence in the industry.Public complaint are immediately dealt withInadequate understanding of the principles of insurance contract and inefficient postal system.

Ongoing TV/Radio programme on Insurance and Claims awareness

Q3 2011 enforcement commences. Conducting regular stakeholder surveys,

More informed consumers that have trust and confidence in the IndustryPublic awarenessConsultant survey on take up of insurance Q3 2011 conduct public survey of insurance Conducting interaction and stakeholder panels

More surveys public meeting and seminars. More public enlightenment Poor public interestIndustry and public panel set up .

Q3 2011 set up government panel and continue interactive sessionsGOAL 3: To strengthen insurance institutions by creating an effective regulatory frameworkNAICOM's presentation to HMF9ACTION PLANBENEFIT TO THE INDUSTRY AND MARKET

CHALLENGES/ CONSTRAINTSPRESENTSTATUSTIMELINESAdopt Risk Based Capital (Solvency II)Better assessment of the industryTechnical expertiseCollaborating with other regulatorsQ2 2012Risk Management framework Instilling a risk culture within the industry and preparing the industry for a risk based regime.Change managementDraft guideline exposedQ4 2011Pursue the passing of the new Insurance bill into Law More up-to-date legislation in line with international best practiceDelay in passing of the bill Bill in process of enactmentQ4 2011Transition to IFRS Accounting systemsEasier access to foreign investment for insurance companies. Less effort and time in the assessment of financial reports- financials are more transparent with more disclosure of credible financial positioncompliant with international financial reporting standardsHuman Capital Accounting practice committee set up. IFRS training and seminars conductedQ4 2011Ongoing onsite and off site inspection of companies

Proper supervision and monitoring of Insurance Companies.Skilled InspectorsConsultants Inspectors utilizedOn going

GOAL 4: To enhance regulatory oversight by transforming the Commissions processes, people and systems.NAICOM's presentation to HMF10ACTION PLANBENEFIT TO THE INDUSTRY AND MARKET

CHALLENGES/ CONSTRAINTSPRESENTSTATUSTIMELINESDeveloping a performance management frameworkEnvironment where employees can excel.Change managementDraft exposedQ4 2011Staff Competency framework;

Internal efficiencyChange management

Draft exposedQ4 2011

Deploying ICT into business processes,

Enhance internal effectiveness and service delivery Technology

IT InfrastructureContract awardedQ4 2011

Developing effective succession and manpower planning.Enhance effectiveness of regulatory process

Human Capital Staff deploymentQ1 2012 transition

GOAL 5: To optimize revenue collection and effective management of the resources available to the Commission.NAICOM's presentation to HMF11ACTION PLANBENEFIT TO THE INDUSTRY AND MARKET

CHALLENGES/ CONSTRAINTSPRESENTSTATUSTIMELINESEffective assessment and timely collection of levies

Levy to support policyholders protection fund Funding80% collection rate Q4 2011 100% collection rate . Install best practice internal control systems

Efficiency in internal regulatory processesFundingDeploymentQ4 2011DEVELOPMENTS IN THE INDUSTRYDevelopment has been taking place in the following four main areas:Regulatory DevelopmentInternal Development in the CommissionMarket Development initiatives Development to manage stakeholder expectationsREGULATORY DEVELOPMENTREVIEW OF THE INSURANCE LAW Insurance law has been reviewed.This year the commission has been engaging with the Ministry of Finance, Senate and House of Rep on the proposed insurance bill. Held sensitization programmes to stress the importance of the proposed bill.

REGULATORY DEVELOPMENTRISK BASED SUPERVISION/RISK MANAGEMENT FRAMEWORK2 weeks training for staff of NAICOM on Risk Based Supervision Solvency II- Risk Management Training for staffSort international technical assistance on RBS (Via FSS 2020 team)Risk Based Supervision Road Map prepared.Release of draft Risk Management Framework guideline for insurance and reinsurance companies (September 11)

REGULATORY DEVELOPMENTINTERNATIONAL FINANCIAL REPORTING STANDARDIFRS Staff awareness held in January 2011IFRS Summit in Lagos for CEO (January 2011)Audit Committee of Insurance Companies(March 2011)Chief Financial Officers of Insurance Companies (April 2011Insurance Accounting Practice Committee set up(May 2011)Financial Reporting Council & Consultants involvement.IFRS Guideline drafted (December 2011)

MARKET DEVELOPMENT FINANCIAL INCLUSION - MICRO INSURANCE & TAKAFULNAICOM is currently working with the GIZ/ Access to Insurance Initiative team on a Diagnostic study of Micro insurance in Nigeria to understand the demand, supply and gaps in Micro insurance and Takaful.

MANAGING STAKEHOLDER EXPECTATIONSCLAIMS HANDLING & COMPLAINTS BUREAU Members of the public now have avenue to settle claims dispute and obtain redress. The complaints bureau has settled several complaints received from individuals and corporate entities and also ensure insurance companies handle claims promptly. Compensation for victims of hit & run drivers Plans are on the way to set up a special fund that will be a contribution from insurance companies to the development of road safety, road traffic equipments and the Nigerian police force.

MANAGING STAKEHOLDER EXPECTATIONS CONSUMER EDUCATION AND PUBLIC PERCEPTION OF INSURANCE To have public awareness campaign MDRI awareness campaign, IFRS workshops, enlightenment programme on TV and Radio, To have public awareness campaign MDRI awareness campaign, IFRS workshops, enlightenment programme on TV and Radio

INTERNAL DEVELOPMENT IN THE COMMISSIONNEW OFFICE BUILDING In June 2011 the Commission completed and moved into its own office buiding

INTERNAL DEVELOPMENT IN THE COMMISSIONPEOPLE, PROCESS & IT SYSTEMS Planned development of an industry portal to hold companies information on insurance policies and for financial returns to be submitted electronically on the portal and complaints from the public to be submitted.

COLLABORATION

MARKET DEEPENINGThe Commission conducted Flag up campaigns in the geopolitical zones in Nigeria Sokoto, Kwara Enugu (February), Port Harcourt (March) to launch 5 compulsory insurance products. A dedicated Market Development & Restructuring Initiative (MDRI) Website went live in May. Radio and Television Campaign utilized.Compulsory insurance enforcement commenced in November. NAICOM enforcement team visited Oyo state to enforce compulsory insurance. Plans to go to all 36 states Some insurance companies have been marketing their products on the back of this MDRI campaign. Inauguration of the diagnostic study of micro insurance/Takaful Islamic insurance in Nigeria to facilitate financial inclusion in collaboration with GIZ (September) Participated in workshop on Climate Based Insurance in Nigeria(July).

Other Regulatory DevelopmentsDivestment of Banks from Insurance Companies Committee to ensure that only those who has suitability fitness, propriety and financial capability take ownership and control of insurance companies that divested from BanksAnti- Money Laundering RegulationSpecial Inspection Remedial ActionCode of Corporate Governance