By ROSEMARY ONUOHA
Despite complaints of being overwhelmed by series of reforms, all insurance and reinsurance companies in the country must establish a Risk Management Department/Unit as part of their risk management strategy by 1st July, 2012.

The requirement is coming on the heels of other reforms which insurers and reinsurers are expected to comply with in the course of the year, irrespective of their complaints that the reforms are one too many and are becoming burdensome.

According to the guideline for developing a risk management framework for insurers and reinsurers in Nigeria, recently issued by the National Insurance Commission, NAICOM, the Risk Management Department/Unit shall be responsible for measuring, monitoring and controlling risk, consistent with the established policies and procedures.

According to NAICOM, risk is the possibility that an event will occur and adversely affect the achievement of a company’s objectives thereby decreasing value for the company’s stakeholders while risk management is the process of identification, assessment and mitigation of risk to which the company is exposed. And all insurers and reinsurers must on that date comply with all the provisions of the guideline.

This year, insurers and reinsurers are expected to transit to International Financial Reporting Standard, IFRS; change their financial year end from July to March, enforce compliance of the compulsory insurance products on the general public; key into the Federal Road Safety Corps database scheme by aligning their own database with that of the FRSC as well as instituting anti-money laundering processes in their systems.

Consequently, the operators have decried all these reforms coming at the same time, saying that many companies may not have the capacity to withstand them all.

However, NAICOM has insisted that insurers and reinsurers just have to look for avenues to realise the various reforms because the insurance sector will not sit back while the rest of the world move on.

“At this moment there are so many changes that are taking place at the same time. We are gravitating from the normal accounting system to international financial reporting standard, we are doing risked management, we are doing anti money laundering issues where we now have to render account and people are now being charged N500,000 for late rendition of account. Now we are also doing Nigerian Insurers Industry Database, NIID, which is voluntary based.

So many things are happening at the same time that we are stretching ourselves to the limit. Most companies which are used to rendering their account by June 30th are now required by law to render it by 31st of March. If you go to insurance companies now all the powers that be are always running around trying to get something done” Mr. Olusola Ladipo-Ajayi, Chairman of Nigerian Insurers Association,NIA, stated.

NAICOM mandates that the Risk Management Department/Unit shall be headed by a Chief Risk Officer who shall be responsible for establishing the risk culture throughout the company and shall possess all necessary skills and shall have access to all resources relevant for attaining complete understanding of the risks associated with the insurance business.

Also, the Chief Risk Officer shall submit a periodic report to the senior management and to the Board on key aspects of the operation of the risk management framework and significant risk exposures and the reporting must include any significant breaches of risk management policies or risk limits and any material loss incidents, and address all material risk classes as well as considering the overall risk profile.

The Risk Management Department/Unit shall on regular basis reassess the methodologies, models and assumptions used to measure and limit risk, NAICOM maintained.

A risk management framework is the totality of systems, structures, policies, processes and people within the company by which the company identifies, assesses, mitigates and monitors all internal and external sources of risk that could have a material impact on the company’s operations.