By BISI OLADAPO
The ongoing crisis rocking the insurance industry can best be described as that of a house divided against itself. For the first time ever, a season of litigations is blooming within the industry, with key players pitched against one another. In a fit of unprecedented rage, some operators have dragged the supervisory authority to court, just as the umbrella body of insurance operators is also in court. All for one cause, the disagreement over the last recapitalization exercise of the sub-sector.
The consensus within the industry is that the present crisis is uncalled for, “It is a bad wind that blows no one good,” says Muyima Omolaye, an insurance policyholder. According to him, the present development calls for caution, if the industry is to sustain the new positive image thrown up by the recapitalization exercise. For Theophilus Kalejaye, “the Nigerian insurance industry is an industry that people do not reckon with, people are skeptical about it. People didn’t believe in the industry before, and now they are fighting themselves. It is unfortunate. Recent developments in the industry have cast doubts on the last recapitalization exercise.
No doubt, the implication of the ongoing impasse in the industry is negatively affecting its activities. Last month, performance of insurance shares on the stock exchange dropped. “Insurance stocks are falling and are no more attractive,” says Effiong Bassey, a stockbroker. He attributed this to the non-release of the operating funds of insurance companies kept with Central Bank of Nigeria, CBN, which is one of the fallouts of the litigations.
“Unless the crisis on ground is solved, the industry can’t move forward. Whatever happens in the industry will impact on the stocks,” he adds.
Lamenting that the insurance sub-sector is passing through a trying period, he continues: “We can’t really feel the impact now until the end of the financial year when insurance companies are expected to pay dividend to their shareholders.” Emphatically, he says, “some companies can hardly operate. Look at limited liability companies, for example. The raise N3 billion to recapitalize, place N2.8 billion in the escrow account with CBN, N300 million in statutory deposit as required by law. What is left to operate with?”
There are other effects on the industry, according to Oyinlols Uthman, an underwriter. “Confidence of various stakeholders is gradually being eroded, multinationals now want to place their risks abroad, against Nigeria’s local content policy; foreign investors are jittery and changing their minds about investing in the industry,” he told the magazine.
Trouble started in the industry a few days to the February 27, 2007 deadline on the recapitalization exercise for insurance companies. Then, the National Insurance Commission, NAICOM, the supervisory body and the executor of government directives under the leadership of Emmanuel Chukwulozie, former commissioner for insurance, recertified NICON insurance as the first company to meet government’s recapitalization requirement. This, of course, was highly criticized by other stakeholders in the sub-sector. Consequently, Chukwulozie held two batches of recertification. At the end of the day, 71 insurance and two reinsurance companies were recertified as fully recapitalized companies allowed to transact insurance business in the country.
But his nightmare started on Monday, March 19, 2007, Nenadi Usman, former minister of finance, announced that Olusegun Obasanjo, former president, had ordered the immediate and indefinite suspension of Chukwulozie from office, as a result of the petitions written against him.
Nine days after, Usman inaugurated a 10-man investigation panel, with Bala Zakariya’u as chairman, to look into the matter. The institution of the panel was informed by the need to investigate the complaints, allegations and accusations made against Chukwulozie. Terms of reference for the panel included the investigation of alleged non-compliance with circulars and directives on policy implementation and disregard for sue process as well as collection, allocation and investment of insurance levy and statutory funds. The panel was also mandated to look into allegations of financial impropriety in the award of constraints for the vehicle insurance sticker, VISER, as well as petitions pending before the Economic and Financial Crimes Commission, EFCC, and Independent Corrupt Practices and other Related Offences Commission, ICPC.
The panel indicted Chukwulozie, who was consequently sacked and replaced with Fola Daniel, former managing director, Globe Reinsurance. The panel also indicted NICON Insurance and Nigerian Reinsurance for not meeting recapitalization requirements. Another technical committee also led by Bala Zakariya’u was also appointed to review the panel’s report, find ways out of the quagmire and recommend how to resuscitate NAICOM. The report of the committee submitted about seven weeks ago, is now the subject of litigation at the Federal High Court, Abuja. The suit was jointly filed by NICON Insurance and Nigerian Re, on which board the federal government has seats. They dragged the attorney-general of the federation and the minister of finance to court, challenging the constitution of the technical committee, questioning the rationale behind the appointment of persons asked to verify the operations of NAICOM and even asking the regulated to probe the regulator.
Now, the activities in the industry have slowed down as the operators groan under lack of operating funds. This is because the money they were asked to deposit in the escrow account with the CBN, amounting to N80 billion, is yet to be released to them, nine months after recapitalization. According to the guidelines issued at the commencement of the exercise, the money was supposed to have been released two weeks after the completion of the exercise.
Having waited for over eight months, it dawned on the Nigerian Insurers Association, NIA, the umbrella body of insurance companies that the waiting may not end soon, more so when NICON got an order of court restraining NAICOM from taking further action on the recapitalization exercise, pending the hearing of the motion on notice before it. Consequently, NIA resolved to join the suit on government’s side, as co-defendant.
Meanwhile, Chukwulozie, as well as Allied & General Insurance Company, have joined the plaintiff, NICON, while the concerned companies want the court to nullify the two reports. Chukwulozie wants his reinstatement as the commissioner. “If the court finds the panel to be illegal, then I will have to be reinstated, hence my joining the plaintiff in this matter to be on the path of justice,” he told the magazine.
To Zakariya’u, there is no crisis in the sub-sector. “There is no crisis in the industry, but the industry is in transition as a result of government’s reform agenda which is affecting all aspects of the nation’s economy”, he told the magazine. But Jimoh Ibrahim, group managing director, NICON, says there is a problem because the exercise was done wwithout an amendment to the Insurance Act 2003, so it was illegal. However, shedding more light on this, Chukwulozie who was in office as the commissioner at the time and who, in fact, conducted the controversial exercise, says “it was true that the National Assembly ought to have legislative approval, but if I was not rudely interrupted, by now we would have effected the amendment and got the approval of the National Assembly, since I had already got the executive approval”.
Reacting to this, Bassey, calls on NAICOM to put its house in order. He wonders why NIA cannot call NICON, One of its members to order. Worried by the ongoing crises, the Risk and Insurance Managers Society of Nigeria, RIMSON, has called on parties in the issue to exercise caution and resolve the matter amicably. Samuel Felemu, executive secretary, RIMSON, said that the society is worried over what implications would be on risk management if the issues are allowed to linger. :The society is concerned about the negative impact the crisis would have on the major stakeholders, particularly on an industry that has been battling with image”, Felemu said.
On the way forward for the industry, both Zkariya’u and Ibrahim agree that the rule of law should take its due course and chart the right path for the industry. For how long the operators will have to wait for this, no one knows.
