NAICOM drives professionalism with 3 operational guidelines

By Onome Amuge

The National Insurance Commission (NAICOM) has issued three operational guidelines for operators in the nation’s insurance industry with a focus on effective risk management and internal control framework to drive innovation and professionalism in line with best practices.

The operational guidelines include; insurance regulatory sandbox operational guidelines, market conduct guidelines for takaful and retakaful Insurance operators, and enterprise risk management framework for takaful and retakaful operators in Nigeria.

NAICOM said the insurance regulatory sandbox is targeted at offering insurance institutions, other firms and persons the opportunity to test business models, products and services that will enhance efficiency in meeting consumers’ needs, encourage innovation that will drive financial inclusion and positive competition, and promote and deliver economic benefits, by lowering the cost of business operations.

Under the market conduct guidelines for takaful and retakaful insurance regarding claims settlement, the commission stipulates  that when a takaful insurance operator makes an offer of settlement, the takaful insurance operator shall disclose to the participant/or claimant the basis used for the offer of settlement. It also stated that a takaful insurance operator shall not settle a claim for less than the amount to which the participant/or claimant would be entitled to receive under the terms of the takaful contract.

Part of the guidelines states that after acceptance of liability and an agreement has been reached between the takaful Insurance operator and the participant/or claimant on the amount of the claims, the takaful Insurance operator shall cause a discharge voucher to be issued not later than five working days from the date of acceptance of liability.

“In the case of claim settlement procedures involving other Takaful Insurance Operator, the claim shall be settled with the participant/or claimant within the appropriate period while potential dispute with respect to subrogation between operator’s are being resolved,”the guideline further stated.

On takaful and retakaful Insurance, NAICOM said it intends to establish minimum risk management standards for Takaful Insurance Operators (TIOs) in Nigeria.

Part of the requirement for operation under the takaful and retakaful insurance is that all takaful insurance undertaking shall establish and maintain a sound Enterprise Risk management (ERM) framework to support the adequacy of its solvency and comply with all relevant Sharī`ah rules and principles.

NAICOM requires that the framework should be comprehensive in nature, dealing with all reasonably foreseeable and relevant material risks of the funds making up the takaful undertaking, and formalised through a set of consistently applied policies including the TIO’s approach to determining the appetite for risk, its process for managing risks and its governance related to risk.

“A Takaful and Retakaful Operator shall establish a process for identifying, assessing, controlling, mitigating and monitoring all reasonably foreseeable and relevant material risks. This must be developed having regard to the Company’s Risk Management philosophy, Shariah principles, set of shared beliefs, attitudes, values, culture and operating style,” the guideline said.

NAICOM said there must be a defined risk appetite which shall state the amount of risk the company is willing to accept. It also emphasised that the company must be clear about who is in charge of risk oversight, assign authority and responsibility and set out an appropriate organisational structure.

Under its risk assessment, response and control level, NAICOM requires all takaful operators to have a process for estimating each risk, the probability that it will occur, the likely consequences if it does, when it could occur, and the possible means of avoiding, mitigating or transferring it.

This process,it said,may commence at the same time as risk identification, as those who identify a risk frequently contribute to its assessment.

Rasaaq Salami, head of corporate communication and market development, NAICOM explained that  the commission expects all operators to ensure compliance with the new guidelines to the benefit of all stakeholders.