MONDAY, 04 OCTOBER 2010 01:00 MODESTUS ANAESORONYE
Exactly three months after June 30 statutory deadline given to insurance companies by the National Insurance Commission (NAICOM) to submit their full year audited financial result only about 50 percent of the over 49 firms have complied with the directive.
For these companies that are yet to obey the stipulated guideline since the end of the deadline, they would be required to pay a fine of N5, 000 for each day it takes them to present the account to the commission. Though many of them have said they were yet to get their audited reports from the external auditors, particularly, those being audited by KPMG, BusinessDay findings revealed that it is not unconnected with the ongoing forensic examination of accounts of insurance companies by NAICOM.
Laide Benson, director of supervision in NAICOM, who confirmed the development, said up to half of the companies were yet to submit their reports. According to her, the commission is not interested in the daily fine paid by companies for not submitting their accounts, but wants compliance to make supervision easy for the commission.
BusinessDay two weeks ago reported that some insurance companies may not be able to hold their annual general meetings (AGM) over activities of 2009 financial year following the inability of a number of them to satisfy NAICOM’s set standard on accounts reporting. The situation now shows that the commission is stringent with accounts reporting, signifying that there is no more hiding place for those who were used to doing it the wrong way.
This is the impact of the new accounting guideline set out earlier in the year by the market regulator which emphasises transparency and also insists on making provisions for outstanding premiums. Outstanding premiums, which formerly formed bulk of many companies’ income volume, have been seen by the commission as deceitful and not in tandem with international best practice. Fola Daniel, commissioner for insurance, said NAICOM is going as far as re-auditing the accounts of some insurance companies that did not meet the expectations of the commission.
According to him, the commission has taken the pains to verify the bank cash balances claimed by companies. “It is not that we are being mischievous, but we have decided to do what is right so that our companies can be respected by other people both locally and internationally”. The commissioner said the accounting standard which the insurance companies have to pass through to see their accounts approved are not new at all, but has been an existing law which was not implemented. Daniel said what the commission has done was to implement an existing guideline and make sure every company complies with it.
The benefit, the commissioner noted, is that at the end of the day, insurer’s balance sheet would have reflected the true state and size of their business and can now be believed. “We want to see a situation whereby insurance companies in Nigeria would be comparable with their counterparts in South Africa, Zimbabwe and other developed jurisdictions”. It will be such that when you place their balance sheets side by side with that of companies from these other markets, we will be respected, Daniel said.
“As a regulator, it is time to allow the prudential guidelines to take precedence so that what happened in the banking industry will not happen in the insurance industry “, Daniel stressed. According to an insurance firm’s managing director, “getting our accounts approved this year was not an easy task and I can bet you many will not be able to hold their AGM this year as a result of this challenge”.