By Patience Saghana
Insurance companies that nitpicking about the delay of approval of accounts by the National Insurance Commission (NAICOM) have solvency problem

L- Mr Fola Daniel, Commissioner for Insurance, Mr George Onekhena, Deputy Insurance Commissioner and Mr Olusola Ladipo-Ajayi, Chairman of Nigerian Insurers Association at the training programme for Insurance journalists by NAICOM in Calabar recently

Mrs Laide Benson, NAICOM’s Deputy Supervisor has said that most insurance companies that go about complaining about the commission’s deliberate delay of their accounts as a result of inadequate solvency margins.

The solvency of an insurance company relates to its ability to settle liabilities.  If the asset values of the company is inadequate (over indebtedness) or can never be accessed at the required moment (lack of liquidity) to settle claims, then the company is insolvent.

Primarily, the solvency of an insurance company depends on the constitution of adequate technical reserves to meet the contractual liabilities and the existence of shareholders funds that would guarantee security.

Benson said the insurance regulatory has to compute solvency margin of the insurer after reviewing the admissible assets and liabilities, item by item; ensures that proper adjustments are made for asset revaluation reserves which have not stayed three (3) years in the accounts and therefore not qualified; and most importantly, determine shortfall in the solvency margin.

Others include: Communicate the shortfall to the Insurer by giving directives for the deficiency to be made good within 60 days in line with section 24 (5) of the Act; Ensure that the fresh funds injected into the business are properly capitalized and Confirm that the Auditor issued a certification stating the extent to which the Insurer has satisfied the margin of solvency as required by section 24 (9) of the Act.

Benson who took Insurance correspondents through Reporting of Insurance Annual Accounts & Ratio Analysis in Calabar stated that the commission resolve to enforce rules to ensure that companies meet their responsibilities and protect the insuring public remain unshaken.

Primarily, she affirmed that the solvency of an insurance company depends on the constitution of adequate technical reserves to meet the contractual liabilities and the existence of shareholders funds that would guarantee security.

According to her, “The solvency of an insurance company relates to its ability to settle liabilities.  If the asset values of the company is inadequate (over indebtedness) or can never be accessed at the required moment (lack of liquidity) to settle claims, then the company is insolvent.

Benson noted that companies liabilities include: insurance funds, reserves for un_expired risk, reserves for outstanding claims, reserves for claims incurred but not reported, amounts owed and/or accrued for settlement of debts owed third parties (i.e. including insurers, reinsurers and insurance agents but excluding proposed dividends and deposit for shares by shareholders and other shareholder’s funds), provisions for taxation (excluding deferred tax liabilities) and sundry liabilities.