This article instalment will be talking about the modes of operation for insurers in Nigeria as prescribed by the Insurance Act of Nigeria and will be focused on the topics of :-
– Requirements as to the principal office of an insurer in Nigeria.
– The appointment of Chief Executives for insurers in Nigeria.
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– Timelines for delivering policy documents under the Insurance Act.
What are the requirements of the act regarding the principal office of an insurer?
– An insurer shall, on the day it is registered to commence business in Nigeria have a principal office to which all communications and notices may be addressed, so that a postal box address or a private mail bag address shall not by itself only be sufficient for the purposes of the foregoing requirement.
– Notice of the location of the principal office or any subsequent charge shall be given within 21 days to the Commission which shall record the same.
– The fact that the address of an insurer is included in its application or in its annual returns or any other return to the commission shall not be taken to satisfy an obligation imposed by the provisions above.
– An insurer’s registered and principal office must be the same.
What does the act say on disqualification from appointment as a director of an insurer?
– No insurer shall appoint or have in its employment a director, Chief Executive, manager or secretary if he :-
a). is or becomes of unsound mind, or as a result of ill health, is incapable of carrying out his duties.
b). is convicted of any offence involving dishonesty or fraud.
c). is not a fit & proper person for the position.
d). is guilty of serious misconduct in relation to his duties.
e). in the case of a person with professional qualifications, has been disqualified or suspended from practicing his profession in Nigeria by the order of any competent authority made in respect of him personally.
What are the provisions of the act on the appointment of Chief executive subject to the approval of NAICOM?
– No insurer shall appoint a person as a Chief Executive whether designated as the Managing Director, Executive Chairman or otherwise if the appointment contravenes the act unless :
a). The insurer has served a written notice on the Commission proposing to appoint that person to the position and containing such particulars as may from time to time be prescribed by the Commission.
b). Such an appointment is approved by NAICOM.
What does the act say on the change of a Chief Executive of an insurer?
– A person who becomes or ceases to be the chief executive of an insurer shall, before the expiration of a period of 30 days beginning with the day on which he does so, notify the insurer in writing and send an advanced copy to the Commission on such matters as may from time to time, be prescribed.
– An insurer shall give written notice to the Commission of the fact that person has become or ceased to be a Chief Executive of the insurance and/or any matter which the person is requested to notify the insurer under the Insurance Act and that notice shall be given before the expiration of the period of 30 days.
What does the act say on timelines for delivering policy documents?
– The policy document evidencing the contract of insurance shall be delivered to the insured party not later than 60 days after payment of the first premium.
What are the applicable penalties under the act in this regard?
– An insurer who contravenes the act in this regard commits an offence and is liable on conviction to a fine of 5 Million Naira.
Section II
This second article instalment will be focused on the required modes of operations for insurers under the Insurance Act as concerns the topics of –
– The Approval of New Products.
– Records to be kept by an insurer.
– Records to be kept by a reinsurer.
– Provisions for unexpired risks and claims.
What does the act say on the approval of new products?
– No new product shall be introduced into any class or category of insurance business without the prior approval of the National Insurance Commission (NAICOM).
– The approval or otherwise of the Commission shall be communicated within 30 days of the receipt of the application.
– An insurer who contravenes the provisions of the act in this regard commits an offence and is liable to a fine of 10 Thousand Naira.
What are the records to be kept by an insurer under the act?
– An insurer shall keep and maintain at its principal office the following :-
a). The memorandum and articles of association (MEMART) of the insurer.
b). A record containing the names and addresses of the owners of the insurance business whether known as or called shareholders or otherwise.
c). The minutes of any meeting of the owners of the policy-making executive (whether known as or called the board of directors or otherwise).
d). A register of all policies in which shall be entered in respect of every policy issued, the names and address of the policyholder, the date when the policy was effected and a record of any transfer, assignment or nomination of which the insurer has notice.
e). A register of its assets.
f). A register of investments showing those which are attributable to the insurance funds and those which are not, and also any alteration in their values from time to time.
– An insurer shall in respect of its life insurance business maintain & keep the following additional records, that is :
a). A register of assured under group policies.
b). A register of loans on policies.
c). A register of cash surrendered values.
d). A register of lapsed and expired policies.
What are the records to be kept by a reinsurer under the act?
– The memorandum and articles of association (MEMART) of the reinsurer.
– Records containing the names and address of the owners of the reinsurer (whether known as shareholders or otherwise).
– Minutes of any meeting of the owners and the policy making executive (Board of Directors or otherwise).
– A register of all treaties , in which shall be entered in respect of every treaty issued, the name of the cedant , and the date when the treaty was effected.
– A cash book.
– A register of new and existing clients.
What are the records to be kept by a life reinsurer?
– A register of assured under group policies.
– A register of cancelled, lapsed and expired policies.
– A register of claims showing the names of the cedant and when the claim is settled.
What does the act say on the separation of accounts and reserve funds?
– Where an insurer carries on the 2 classes of insurance business, all the receipts of each of those classes of insurance business shall be entered in a separate and distinct account and shall be carried to and from a separate insurance fund with the appropriate name so that in case of life insurance there shall be –
a). The individual life insurance business fund.
b). The group life insurance business and pension fund.
c). The health insurance business.
What are the provisions of the act on unexpired risks and claims?
– An insurer shall in respect of its general business establish and maintain the following provisions applicable in respect of each class of insurance business-
a). Provisions for unexpired risks which shall be calculated on a time apportionment basis of the risks accepted in the year.
b). Provision for outstanding claims.
c). Provision for outstanding claims which shall be credited with an amount equal to the total estimated amount of all outstanding claims with a further amount representing 10% of the estimated figure for outstanding claims in respect of claims incurred but not reported at the end of the year under review.
Section III
This original article instalment will be focused on the provisions of the Insurance Act of Nigeria on the modes of operations for insurers concerning :-
– Contingencies for Insurers
– Life Insurance Business reserves
– Reserves for Reinsurers
– Solvency margins under the act
What are the provisions of the act on contingencies?
– An insurer shall establish and maintain contingency reserves to cover fluctuations in securities & variations in statistical estimates.
– The contingency reserves shall be credited with an amount not later than 3% of the total premium or 20% of the net profits (whichever is greater) & the amount shall accumulate until it reaches the amount of the minimum paid-up share capital or 5% of the net premiums (whichever is greater).
What are the reserve requirements of the act for life insurance businesses?
– An insurer shall in respect of its life insurance business maintain the following reserves :-
a). A general reserve fund which shall be credited with an amount equal to the net liabilities on policies in force at the time of the actuarial valuation and an additional 250% of net premium for every year between valuation dates.
b). A contingency reserve fund which shall be credited with an amount equal to 1% of the gross premiums or 100% of the profits (whichever is greater) & accumulated until it reached the amount of the minimum paid-up share capital.
What are the reserve requirements of the act for reinsurers?
– A reinsurer shall establish a general reserve fund which shall be credited with an amount :-
a). Not less than 50% of his insurer’s gross profit for the year where the fund is less than the Authorised share capital of the insurer.
b). Not less than 25% of the reinsurer’s gross profit for the year where the fund is equal to or exceeds the authorised capital of the insurer.
What are the provisions of the act on solvency margins?
– An insurer shall in respect of its business other than its life insurance business, maintain at all times a margin of solvency being the excess of the value of its admissible assets in Nigeria over its liabilities in Nigeria consisting of :-
a). Provisions for unexpired risks.
b). Provisions got outstanding claims.
c). Provisions for claims incurred but not yet reported, and
d). Funds to meet other liabilities.
– The solvency margin referred to in this provision shall not be less than 15% of the gross premium income less reinsurance premiums paid out during the year under review or the minimum paid-up share capital (whichever is greater).
– Any amount due as liability to reinsurers which are attributable to outstanding premiums in respect of the current year excluded under the preceding paragraph shall be excluded from liabilities.