By Rosemary Iwunze

Chief Executive Officers of Insurance companies have called for measures to address the challenges of implementing Risk-Based Supervision (RBS) in the industry.

Speaking on the heels of the commencement of Risk-Based Supervision in the insurance industry this week by the National Insurance Commission (NAICOM), the CEOs highlighted the knowledge gap among non-executive directors in some companies and delay in data supply as part of the expected challenges of implementing RBS in the industry.

RBS is a system in which the supervising authority allocates time and resources to firms based on the level of risk inherent in their balance sheet.

The RBS is contrasted with compliance-based supervision where the latter involves applying the same minimum standards across the industry, checking for and enforcing compliance with rules, legislation, regulations or policies that apply to an entity.

Speaking to Vanguard implementation of the RBS, Managing Director of Achor Insurance Brokers, Mr Sunny Apere said that the presence of non-executive directors without risk management expertise on a board may create an environment where decisions are made in a manner not so well-thought-out.

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Apere said: “For effective implementation of RBS, there is need to bridge the insurance or risk management knowledge gap that exists within the non-executive directors in some boards of the Nigeria insurance industry.

“This is because the presence of non-executive directors without insurance or risk management expertise on a board may create an environment where decisions are made in a manner not so well-thought-out, thereby making it difficult for the board’s effective oversight functions without bias or compromise and communication with executive management and stakeholders.”

Apere said that the limited insurance training programmes organized by the regulator for directors in the industry might not be sufficient in the RBS regime.

“Thus, it would be appropriate to have at least one insurance professional as a non-executive director on the board of an insurance company, going forward.

Also speaking to Vanguard, Managing Director of Universal Insurance Plc, Mr Ben Ujoatuonu said that the regulator could face the challenge of regular supply of data from insurance companies.

He said: “RBS is extremely data-intensive and thus it is unlikely that insurance companies will be able to provide data in a seamless and automated manner to the regulator on a regular basis due to existing poor data quality and inappropriate IT systems.”

Ujoatuonu said that the RBS  is likely to improve the financial and operational efficiency of insurance companies and their ability to underwrite large volume of business and material risks, going forward.

“Thus, RBS regime will enable the Nigerian Insurance industry to compete globally and contribute significantly to the country’s economy,” he stated.

Vanguard News Nigeria