By Rosemary Iwunze
The National Insurance Commission, NAICOM, has attributed its inability to revoke the operating license of illiquid (weak) insurance firms consistently defaulting in claims settlement due to the provision of the law that allows companies with assets in excess of liabilities to remain in operation.
According to NAICOM, although some companies are illiquid (cash strapped), they are permitted to continue operations as long as they have assets that exceed their liabilities.
The regulator therefore stated it cannot revoke the operating license of such firms as they still have the opportunity to sell off some assets and settle outstanding claims.
Speaking to Vanguard on the sidelines of a seminar for journalists in Lagos, Head, Governance and Complaint Bureau of NAICOM, Mr. Ahmed Adamu said that some of the companies defaulting in claims payment are having liquidity challenges.
He said: “Some insurance companies defaulting in claims settlement have assets in the nature of buildings that they intend to sell. However, to get appropriate buyers has been very difficult.
“We have long given them the approval to sell off some assets for the purpose of meeting their liabilities since they don’t have liquidity, but buyers have not been forthcoming.
“So if you gauge them on the issue of solvency, based on the true position of the law, the companies can be said to be solvent because they have sufficient assets to meet their liabilities.
“As a regulator, we are committed to making these companies have cash injections that will meet the liabilities. In the last recapitalization exercise in 2007, substantially what some companies achieved was more non-cash recapitalisation in the form of buildings. This has continued to pose a challenge to these companies.”
Also speaking, Director Inspectorate, Mr. Barineka Thompson, said: “We keep track of insurance companies and we know when they degenerate
“We evaluate and look at their financials, governance, and also their operations and then certain indications that the Commission already have in our framework to assist us determine when to intervene.”
Vanguard News Nigeria