NAICOM Targets Effective Risk Mgt, Releases 3 Operational Guidelines For Sector

The National Insurance Commission (NAICOM) has released new code of conduct for operators in the nation’s insurance industry with a focus on effective risk management and internal control framework. 

The new guidelines that were released yesterday are ‘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.

Under the insurance regulatory sandbox, the aim is to provide 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.

By the new guidelines, NAICOM expects all Operators to ensure compliance with the new guidelines to the benefit of all stakeholders. Attached are the various guidelines for your necessary action, corporate communication and market development for the commission, ‘Rasaaq ‘Salami said. 

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

This guideline discusses how management of risks inherent in the TIO shall be implemented as a TIO is exposed to risks that may affect its ability to achieve its objectives or even its continuing existence.

This guideline was designed to articulate principles that may be applied to a variety of circumstances, and does not prescribe specific quantitative standards. “This is for practical reasons; differences in the environments in which different TIOs Operate, as well as differences in their operational Frameworks, mean that a detailed prescription that might be calibrated to suit one entity would not necessarily be suitable for others,” the guideline read in part.

Part of the requirement for operation under the Takaful and Retakaful Insurance is that all Takaful Insurance Undertaking shall establish and maintain a sound ERM framework to support the adequacy of its solvency and comply with all relevant Sharī`ah rules and principles.

“This framework shall be comprehensive in nature, dealing with all reasonably foreseeable and relevant material risks of the funds making up the Takaful Undertaking, and shall be formalized through a set of policies, consistently applied, 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 defined risk appetite which Shall state the amount of risk the Company is willing to accept the company must be clear about who is in charge of risk oversight, assign authority and responsibility and set out an appropriate organizational structure.

Under its risk assessment, response and control level, NAICOM expects 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 may commence at the same time as risk identification, as those who identify a risk frequently contribute to its assessment.