Ifeanyi Ugwuadu
In a fresh bid to curtail overexposure of insurers to their parent companies, insurance companies are no longer allowed to invest in their parent companies. It is believed that insurers= links to their parent companies subjected those companies to risks faced by the parent companies and caused so much investment loss to such insurers during the capital market crash.

Loans advanced by banks to some of their subsidiaries to buy shares during the stock boom is seen to have caused more harm in the investment returns of the companies than good.

Apparently addressing the alleged reckless investment of proceeds from public offers and private placements, the Commission forbids investment of insurance funds in subsidiaries.

Similarly, to insulate insurers= funds from the vagaries of stock market, the National Insurance Commission has issued guidelines for asset allocation to specific investments. In it the regulator proposes a restructuring of insurers= investment portfolio to minimise risk arising from over-concentration of assets.

The policy underscores the new impetus by government to guide insurance out of the pitfalls of the banking industry and a redressing of the appetite of insurers for high risk investments. Apart from redefining the provisions in 2009 guidelines in terms of cash domiciliation in banks, insurers are now prohibited from exceeding 20% placements of their total current account balances in any one bank.

With respect to the liquidity requirements for different risks insurers and reinsurers carry, investment in quoted equities has been pegged at 50% while unquoted equity investment should not exceed 10%. Investment in equipment leasing shall not exceed 5% while property investment from life funds and non-life funds are now 35% and 25% respectively.

Investment in companies that have not reported profit or declared dividend in the previous three years is prohibited for insurers and reinsurers.

The new investment guideline places a 25% cap on investment of shareholders funds in subsidiaries. ANot more than 5% of the total equity investment shall be placed in the security of one company.

In line with NAICOM=s target of curtailing investment in non-core entities by investors who corner other investors= money in private placement, the regular requires not more than 25% investment of such funds in Anon-insurance related companies or ventures.

It was learnt that some investors realised billions of naira from offers and invested heavily on hospitality business even to the detriment of the insurance companies.

Equally to minimise the contagion effect of toxic assets, age requirement for outstanding premium debts have been revised; under 90 days gets clean debt bill. But 91 days to 180 days shall be provided for 50% while any debt above 180 days shall be provided forfully.