National Insurance CommissionÂ (NAICOM) said it has increased surveillance on insurance companies toÂ check spread of toxic assets to the insurance market as well as protect policyholders.
â€œThere is increased oversight on the liquidity position, capital adequacy, profitability, cost profile and compliance with of Code of Corporate Governance,â€ says Mark Ordu, the Commissionâ€™s Director in charge of Finance andÂ Accounts.
Similarly in line with expectations that insurance companies should develop global standards of practice, Ordu revealed that â€œNAICOM has in turn put in place appropriate collaborative machinery with international regulators to limit the spread of toxic assets.â€
In a paper delivered at a retreat for journalists in Benin recently, Ordu disclosed that NAICOM has taken several steps to ensure the safety of policyholders in the face of the financial crisis pointing out that strengthening corporate governance structures is key to a stable market.
â€œThe current challenge for NAICOM is therefore, the need to further strengthen the regulatory framework in order to minimise the potential effects of contagion risk and promote investor confidence for the long term growth of the industry,â€ he stated.
Aside the increased oversight on insurance operations, companies are now expected to appoint a top management staff of not below an assistant general manager as internal controller (auditor) to ensure he can stand up and demand answers from the CEO.
Ordu said experience has shown that when an auditor cannot confront a chief executive to explain financial statements, the question of corporate governance suffers.
He was also emphatic that insurance companies should appoint persons who understand figures to their audit committee to ensure that oversight of the committee is effective. he frowned at situations where persons are appointed who are not knowledgeable in financial matters.
In addition, NAICOM now demands appointment of independent directors who have a sound financial independence and therefore, could act in the interest of policyholders. Such persons should have no financial interest in the company, he explained.
Furthermore, â€œinsurers are required to put in place effective procedures for monitoring and managing their assets and liability positions to ensure that their assets and investment activities are appropriate to their liability and risk profiles and their solvency positions,â€ the Commissionâ€™s chief accountant stated.
Failure to comply with the requirements may earn the company either whole suspension of its operations or suspension in some lines of business. The assets of the insurer whose licence has been withdrawn may be put under a trust to prevent disposal.
Ordu observed that establishing a strong corporate governance structure is as necessary as the operations of the company and must strictly be demanded by NAICOM to protect policyholders and investors in the insurance market.