INSURANCE COMPANIES

INTRODUCTION

Insurance is a contract in which an Insurance Company undertakes to indemnify a Policyholder in the event he incurs loss to property or other specific contingencies or perils. The focus of this article is on Insurance Companies.

From the above definition of insurance, it is very clear that there are two main parties to an insurance contract. And these are the Insurance Company (Insurer) and the Policyholder.

There are always lots of insurance policies from insurance companies. And willing prospective policyholders can always find an insurance company willing to underwrite their risks in exchange of premiums.

Auto insurance, health insurance, homeowners insurance, property insurance, life insurance, are commonest class of personal insurance. While there are still other policies with respect to third party liabilities offered by these insurance companies.

In this article, we shall discuss the meaning of Insurance Companies and their role in the insurance industry.

WHAT ARE INSURANCE COMPANIES?

Insurance Companies are legal entities that create insurance products by underwriting risks in exchange for receipts of premiums. They are financial intermediaries which offer direct insurance or reinsurance services, providing financial protection from future hazards.

Insurance companies are responsible for accessing the risks connected with different types of insurance coverage or risks. In the circumstance the event insured against happens, the insurance companies will indemnify you. This indemnity may be in the form of paying you the amount on the face of the Insurance Policy or otherwise.

THE ROLE OF INSURANCE COMPANIES

The role of insurance companies cannot be over emphasized. Here, we shall examine some of the roles of the insurance companies in the society.

INSURANCE COMPANIES AS CATALYSTS FOR FINANCIAL STABILITY:

Insurance companies play significant roles in the stability of financial systems. This is as a result of their huge investments in the financial markets. Insurance companies broker links between the Policyholders and the banks. And as well ensure the financial stability of the homes through the insurance of their risks. Needless saying that the financial stability of the homes culminates to that of the larger economy.

INSURANCE COMPANIES AS HUGE INVESTORS IN THE FINANCIAL MARKET

Insurance companies usually invest the premiums paid by Policyholders. Most of these investments are usually long term. And such investments contribute enormously in economic growth and financial market stability.

Similarly, as a result of the unlikelihood of insurance companies to liquidate their investments when financial markets assets prices are declining.

INSURANCE COMPANIES AS MEANS OF ECONOMIC DEVELOPMENT.

insurance companies do have the capacity to always turn their premiums into productive investments. These investments provides all round economic opportunities. Insurance companies also hold substantial stakes in the areas of estate management. And as well as banking, Tourism and the hospitality industry, reinsurance business and so on.

Similarly, Insurance Companies encourage savings, promote commerce and trade and as such, encourage financial stability and economic development.

Insurance Companies equally promote economic development through employment generation, spreading of risks, and generation of financial resources.

 The National Bureau of Statistics in the data released by it confirmed that the insurance sector in Nigeria accounted for 12.5% of the country’s overall financial sector in the 1^st quarter of the year, 2021. And further states, that about sixteen Insurance Companies paid total claims of N67.12bn in the time under review.

REGISTRATION OF INSURANCE COMPANY IN NIGERIA

insurance business around the world is a very lucrative one. And each country is responsible for providing the legal framework that regulates its insurance industry.

Persons who may carry on insurance business in Nigeria

Insurance business in Nigeria is under the regulation by of Insurance Act, 2003, CAP, L17, LFN, 2004. Thus, Section 3(a) provides, no person shall commence or carry on any class of insurance business as provided in section 2 of the Act except;

1. A company duly incorporated as a Limited Liability Company under the Companies and Allied Matters Act, 1990; (currently Companies and Allied Matter Act ,2020, by virtue of amendment of the old Act) or
2. Body duly established by or pursuant to any other enactment to transact the business of insurance or reinsurance.

By the express provision of section 46 of Act. And subject to other provisions of the Act, no insurer shall commence insurance business in Nigeria (i.e after due incorporation with the Corporate Affairs Commission unless such Insurer has its registration with the Commission under the Act. Also, by the provision of section 102; “The commission means the National Insurance Commission constituted under Act 1 of 1997”.

Compulsory registration of Insurance Companies in Nigeria

By the  dictates of section 4 (2), the  Commission shall not  grant approval if it is not sure that it is not in the public interest or in the interest of the Policy Holders or persons who may become Policyholders to grant same.

Conversely, Section 4 (3) gives the Insurer right to appeal the decision of the Commission to the Minister of Finance within thirty days of the refusal of the Commission to grant approval. And the minister shall have sixty (60) days from the day of receipt of appeal to give his decision. See Section 4 (4) of the Act.

Application for Registration

By section (5), an application for registration as an Insurer shall be to the Commission in the usual form. And be accompanied by a business plan. And such other documents or information as the commission may, from time to time direct or require.

Moreover, life insurance and general insurance business shall be subject to separate Application and registration.

Power of Registration

Similarly, Section 6 of the Act vests the power of registering insurer on the commission (the National Insurance Commission). And went further to enumerate the requisite conditions before the Commission can register a proposed insurer. Section 7, further provides that where the Commission is not of the opinion to register, it shall reject the application in writing to the Applicant within 60 days of the submission of the application of the commission’s intention to reject the application”.

Denial of registration and Appeal

 And by Section 7 (2), any applicant aggrieved by the intention of the Commission to reject an application for registration as an insurer may within thirty [30] days after the notice of the Commission’s intention to reject application, appeal to the minister of finance.

An applicant is required to maintain certain paid up share capital before carrying on insurance business in Nigeria. And which shall be in possession with the Central Bank of Nigeria. See Section 9 & 10 of the Act. By Section 10 (1) of the Act “An insurer intending to commence insurance business in Nigeria shall deposit the equivalent of fifty per cent of the paid up share capital referred to in section 9 of the Act referred to as “statutory deposit” with central bank. And failure to make the statutory deposit shall constitute a ground for cancellation of certificate of registration. Consequently, once the requirement for registration is met, the application for registration shall be forwarded to the director in the prescribed manner and annexed with all other particulars which the Director may require.

Finally, section 6 (2) of the Act provides that,” the Commission shall if satisfied, register the applicant as an insurer. And issue the applicant a Certificate of Registration”. And the notice of the registration of an applicant insurer shall be published in the Gazette or in other manner.

Requirements for registration of an Insurance Company in Nigeria

The requirements for registration as provided under section 6 (1) of the Act to be met by the applicant are:

1. The class or category of insurance business shall be conducted in accordance with sound insurance principles;
2. The applicant being one of the person referred to under section 3 is duly established under the applicable law. And has a paid up share capital and statutory deposit as specified in section 9  of this Act for the relevant class of insurance business.
3. The arrangement relating to reinsurance treaties in respect of the class or category of insurance business to be transacted are adequate and valid.
4. The proposal forms, terms and conditions of policies are in order and acceptable;
5. There shall be competent and professionally sound persons as may be determine from time to time by the  commission to manage the company;

OTHERS ARE;

1. The applicant does not have in its employment a person not fit for appointment by an insurer under section 12 of this Act.
2. The Directors have attended the Promoters interview. And are persons who have not been involved in or been found guilty of fraud.
3. The name of the applicant is not likely to be mislead for the name of any other insurer. Or who is or has been an insurer or so nearly resembling that name, as to be capable of deceiving.
4. The applicant has paid the fee prescribed for registration.
5. It is in the interest of public policy to register the applicant.
6. Where the class of insurance is other than life insurance business, the applicant is for the purpose of transacting not less than three class of insurance business
7. The applicant has a satisfactory business plan and feasibility study of the insurance business he intends to transact within the next succeeding five years from the date of the application; and
   1. that there is compliance with section 9(1)(d) with respect to reinsurance business. And any other condition the commission may from time to time provide.

Consequent upon the above condition, and if the director is not sure, with any of the matters as above, he shall give a notice in writing of his intention to reject the application. Thus, an applicant not comfortable with the decision shall lodge a notice of appeal with the Minister of Finance stating the grounds of such appeal within sixty (60) days of the director’s refusal to pronounce her decision on the appeal of receipt of same.