BGL Plc has called on the National Insurance Commission (NAICOM) to carry out an industry wide capital adequacy verification exercise to evaluate the stability of the sector.

In its report titled, “The Nigerian Insurance Sector: Unlocking Value through enforcement of compulsory insurances” BGL noted that the Nigerian insurance industry may have been substantially affected by the protracted financial system downturn in the country as it has been estimated that the industry has lost as much as N200 billion to the meltdown in the stock market.

According to BGL “This has eroded the gains of the recapitalisation exercise as it may have impacted seriously on the shareholders’ funds of all the players in the industry.”

According to the report, there is also the immediate need to effect the move from compliance based supervision to risk based supervision upon which the new accounting standards were based, adding that it is observable that about half of the insurers were unable to meet the June 30, 2011 deadline for the submission of their 2010 financial accounts.

The level of compliance with regulatory guidelines in the insurance sector is low. It is characteristic of the industry for financial results of many of the players not to be released for six to ten months.

Enforcing the compliance of the six compulsory insurance alongside the effectiveness of the provision of the Local Content Act are key success factors to the growth of the industry, the report maintined.

“NAICOM claimed to have constituted the enforcement teams that are made up of the Police, Vehicle Inspection Office (VIO), Federal Road Safety Commission (FRSC), Fire Services and Planning authorities among others; however the models of enforcement remain ambiguous. The adoption of the model for enforcing motor insurance would be more effective at enforcing the other classes of insurance.”

BGL noted that the Builder Liability Insurance and Occupier Liability Insurance could be incorporated into land and property registration procedures and annual tenement rates payments. Medical Professional Liability Insurance is easier via partnership with NHIS accreditation processes for medical establishments.

The Employers’ Liability Insurance and Statutory Group Life Insurance may require NAICOM to partner with the NASB and CAC to add this compliance information as part of statutory disclosures in financial reports of affected companies.