…..CIIN President Akinjide Orimolade says stronger capital must be matched by quality data, skilled supervisors and stronger corporate governance to deliver lasting insurance-sector stability.
By Benjamin A. Ameh
Nigeria’s insurance industry has entered a new phase following the successful conclusion of the recapitalisation exercise, but the stronger capital base has also created a fresh regulatory challenge for the National Insurance Commission (NAICOM): how to effectively implement Risk-Based Supervision (RBS) across the industry.
The next test for the regulator is no longer simply whether insurance companies have met the new minimum capital requirements. It is whether NAICOM can effectively determine the risks each operator carries, assess the quality of its risk-management systems and intervene early when vulnerabilities emerge.
The shift places greater emphasis on quality data, supervisory capacity, actuarial expertise, technology, risk management and corporate governance.
It also means that the success of recapitalisation will ultimately depend on whether the industry’s stronger financial foundation is matched by equally strong institutional and supervisory capabilities.
CIIN President: Capital Alone Cannot Guarantee Insurance Stability
The President and Chairman of Council of the Chartered Insurance Institute of Nigeria (CIIN), Mr. Akinjide Oluwarotimi Orimolade, FIIN, who is the 53rd President and Chairman of Council of the CIIN, said the successful recapitalisation had provided the industry with a stronger capital foundation but warned that capital alone could not guarantee stability.
“Absolutely. Recapitalisation has given the industry a stronger capital foundation, but capital alone does not guarantee stability but capabilities,” Orimolade told The Ameh News.
According to him, the next phase of the reform agenda must focus on developing the institutional, technical and professional capabilities required to make Risk-Based Supervision effective.
“The next step is effective Risk-Based Supervision, supported by quality data, skilled supervisors and strong corporate governance,” he said.
His position captures the central challenge confronting Nigeria’s insurance regulatory framework: moving from a system that places significant emphasis on compliance with prescribed rules and minimum capital requirements towards one that continuously evaluates the actual risk profile of individual insurance companies.
Insurers Must Take Responsibility for Their Risks
Orimolade also stressed that effective risk-based regulation cannot be achieved by NAICOM alone.
He said insurance companies must strengthen their internal risk-management frameworks and develop the capacity to identify, measure and manage the risks associated with their operations.
“Insurers must be able to identify and manage their risks, while NAICOM’s role is to ensure that those risks are properly managed and that appropriate measures are in place to address them,” he added.
The position places responsibility on both sides of the regulatory equation.
While NAICOM must possess the expertise, data and systems necessary to identify emerging vulnerabilities, insurers must maintain strong enterprise-risk management structures, competent boards and management teams capable of responding to changing risks.
Recapitalisation Raises the Regulatory Bar
NAICOM’s recapitalisation exercise significantly raised the financial requirements for operators and was designed to create stronger balance sheets, improve claims-paying capacity, enhance domestic risk retention and provide a stronger foundation for risk-based capital regulation.
NAICOM initially confirmed 43 insurers and reinsurers as having met the new capital requirements before subsequently confirming seven additional insurers. The Commission announced that 48 insurance companies and two reinsurance companies had been confirmed compliant, bringing the recapitalisation exercise to a successful conclusion.
The achievement provides the regulator with a stronger capital baseline from which to deepen supervision.
But minimum capital remains only one indicator of financial resilience.
An insurer can meet the required capital threshold and still face weaknesses in underwriting, claims management, investment concentration, liquidity, reinsurance, governance, technology or operational risk.
That is precisely why RBS becomes critical.
The Data Challenge
One of the biggest vulnerabilities facing the new supervisory regime is data quality.
Risk-based supervision depends heavily on accurate, timely and comprehensive information from regulated entities.
NAICOM needs reliable information on insurers’ underwriting exposures, claims, technical provisions, investment portfolios, liquidity positions, reinsurance arrangements and other material risks.
Where data is incomplete, delayed, inconsistent or inaccurate, the regulator’s assessment of an insurer’s risk profile can also become unreliable.
The challenge therefore goes beyond collecting regulatory returns. NAICOM must have the technology and analytical capacity to validate the information, identify unusual patterns and convert data into early-warning signals.
Supervisory Capacity Will Be Critical
RBS also increases the importance of professional judgment.
Unlike a traditional checklist-based approach, risk-based supervision requires regulators to assess the severity and probability of different risks and determine how much supervisory attention individual operators require.
The Ameh News question chart with the CIIN President on Now that the recapitalisation exercise has strengthened the capital base of the insurance industry, do you agree that the next major test for NAICOM is the effective implementation of Risk-Based Supervision, particularly in the areas of data quality, supervisory capacity and corporate governance?
CIIN response:Absolutely. Recapitalisation has given the industry a stronger capital foundation, but capital alone does not guarantee stability but capabilities. The next step is effective Risk-Based Supervision, supported by quality data, skilled supervisors and strong corporate governance. Insurers must be able to identify and manage their risks, while NAICOM’s role is to ensure that those risks are properly managed and that appropriate measures are in place to address them.
This demands specialised expertise in actuarial science, insurance, accounting, investment, risk management, corporate governance, technology and data analytics.
A shortage of adequately trained personnel could undermine the effectiveness of the framework, particularly as Nigerian insurers become larger, more sophisticated and exposed to increasingly complex risks.
NAICOM has therefore been investing in technical training, professional development and external technical support as it strengthens the infrastructure for risk-based regulation.
NAICOM’s RBC Framework Still Requires Deeper Calibration
The transition towards Risk-Based Capital (RBC) is also expected to strengthen the regulatory architecture.
NAICOM has engaged Ernst & Young (EY) to support the development and implementation of the RBC framework, including strengthening the Commission’s technical capacity.
The next phase involves quantitative impact studies and industry-wide data collection to help calibrate risk parameters before the framework and associated guidelines are fully implemented.
This is significant because the effectiveness of RBC depends on whether the parameters accurately reflect the risks inherent in the Nigerian insurance market.
The framework cannot simply be imported from another jurisdiction. Nigeria’s economic environment, claims patterns, investment landscape, foreign-exchange exposure and sector-specific risks must be properly reflected.
Governance: The Other Pillar of RBS
Corporate governance is equally important.
A well-capitalised insurer can still become vulnerable if its board fails to exercise effective oversight, management takes excessive risks or internal controls are weak.
Risk-based supervision must therefore examine not only the numbers on an insurer’s balance sheet but also the quality of its decision-making structures.
Boards must understand the risks being taken by their companies and ensure that appropriate controls are in place.
For NAICOM, this means corporate governance should remain a central component of supervisory assessment rather than a separate compliance exercise.
The Risk of Late Detection
Another vulnerability is late detection of emerging risks.
Insurance risks can change rapidly as a result of economic shocks, exchange-rate movements, major catastrophe losses, investment-market volatility, cyber threats, liquidity pressures or reinsurance failures.
A supervisory framework based heavily on historical data could therefore fail to identify new risks quickly enough.
NAICOM will need to complement risk models with stress testing, scenario analysis, continuous monitoring and early-warning indicators.
The objective should be to identify deterioration while there is still sufficient time for corrective action.
Experts: The Real Test Is Implementation
Economic analyst Celestine Ukpong said the effectiveness of the new supervisory regime would ultimately depend on how well NAICOM converts regulatory data into practical supervisory intelligence.
He noted that the regulator must be able to distinguish between insurers based on their actual risk profiles rather than relying solely on capital adequacy.
According to him, effective RBS should enable NAICOM to identify weaknesses in underwriting, investment concentration, governance and liquidity before they become threats to policyholders or the wider market.
Financial expert Peter Adebayo, FCA, similarly emphasised the need to examine the quality of capital alongside its quantity.
He noted that stronger capital is important, but regulators must also understand the quality of insurers’ assets, liabilities, earnings and risk exposures.
The implication, he said, is that the post-recapitalisation regulatory regime must become more analytical and forward-looking.
The expert perspectives above are presented as analytical commentary rather than verbatim quotations.
A New Test for NAICOM
The conclusion of recapitalisation has effectively raised the regulatory bar for NAICOM.
The Commission now has to demonstrate that it can use the industry’s stronger capital base to build a more resilient insurance market.
That will require a supervisory system capable of answering several fundamental questions:
What risks is each insurer taking?
Does the insurer have enough capital for those risks?
Are its management and board capable of controlling them?
Is NAICOM receiving reliable information quickly enough to detect deterioration?
And can the regulator intervene early when an insurer’s risk profile changes?
The answers will determine whether RBS becomes a transformative reform or simply another layer of regulatory compliance.
Conclusion: Capital Has Raised the Floor — Supervision Must Raise the Standard
Nigeria’s insurance recapitalisation has raised the financial floor of the industry.
But as CIIN President Akinjide Orimolade has pointed out, capital alone cannot guarantee stability; capabilities matter.
The next phase therefore requires a coordinated effort by NAICOM, insurers, boards, actuaries, professional bodies and other stakeholders to strengthen data quality, technical expertise, corporate governance and risk-management systems.
For NAICOM, the challenge is particularly significant.
The regulator must now demonstrate that it can move beyond verifying minimum capital to continuously understanding the risks confronting individual insurers and taking timely corrective action.
Recapitalisation has strengthened the industry’s financial foundation. Risk-Based Supervision will determine whether that foundation can support a safer, more resilient and more trusted Nigerian insurance market.
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