Effective implementation of local content law in the insurance industry whereby risks from the domestic economy are exhausted within before it is taken offshore will result to strong growth in the sector, expert has said.
Local content law requires that risks emanating from the local market are exhausted before it is taking abroad, on the approval of the National Insurance Commission (NAICOM), and this has not been effectively enforced causing the industry millions of dollars.
According to industry watchers, less than 30 percent of the risks in oil and gas business are retained locally despite the huge potential in that industry.
Isioma Chukwuma, managing director/CEO, Nigeria Re who spoke during an interview at the sideline of a two-day Seminar organized by Nigeria Reinsurance Corporation in collaboration with GIC India and South Africa for reinsurance staff of underwriting companies and brokers in Nigeria, held in Lagos said enforcement is critical to achieve success in industry.
Chukwuma who did not fail to acknowledge that the local industry does not have the needed capacity to retain all the risks said “definitely we do not have adequate capacity, but what we are saying is that the local market should make sure that at least they exhaust what we have”.
“All we are asking is that they should give the local underwriters, the local reinsurers first right of refusal to take up their capacity before they take it abroad”
She noted that the National Insurance Commission (NAICOM) is committed to helping the industry on this, “they have actually issued out circulars to the market but then, companies are not yielding to that circular, so what we are having is lack of compliance.
“Yes, circulars have gone out but how to ensure it is strictly adhered to is the challenge we are facing, Chukwuma observed.
Speaking on falling rates in premium, Chukwuma noted that it is very unfortunate because we all know that inadequate rates have always been the challenge. “Rates on premiums are not charged commensurate with the exposure, so we find a situation where the claims are occurring but we have not charge commensurate premium.”
She however noted that luckily, the Professional Reinsurers Association of Nigeria (PRAN) is coming up again and will look at a strategy to address the issue of rates.
“Recently we are taking steps to make sure that PRAN comes back because we are concerned about the current down turn of the premiums.”
“Claims are going up and rates are not adequate to compensate for all these. So PRAN, is taking a stringent step to ensure that adequate rates are charged and that they are going to set out minimum rate which we hope that the market is going to follow.”
“It will be in the best interest of everybody. The participants are also crying that rates are not adequate but because of competition we find them still cutting rates, even when it is no longer profitable”.
We are hoping that some form of sanity is restored in the market before PRAN finally takes its rightful position in the market.
On why Nigeria Re organized the training, Chukwuma observed that as a reinsurance company, one of its services is to render or provide training for her cedants.
“I’m sure you know in the past, Nigeria Re was noted for regular training of cedants. For years now we haven’t done that so we think that the time has come for us to provide this training for our underwriting partners.”
“This particular session has been targeted for the reinsurance managers, and so luckily we had to do it with GIC India and South Africa.
According to her, the training is the beginning of a reawakening of the customer confidence in Nigeria Re’s capacity.
She said the training will enable them have more knowledge and when they are knowledgeable about what they are doing Nigeria Re will benefit from it. “We will do better underwriting and less claims will hit the market; less claims will come to the reinsurance. So on the long run it’s a win-win situation which everybody.”
“Companies will do profitable business because they are more aware and knowledgeable of what they do and the reinsurance will also write profitable businesses.”