July 25, 2011 by JOSHUA
THE National Insurance Commission (NAICOM) may sanction 19 licensed underwriting firms operating in the industry for failure to meet the statutory deadline of June 30 this year, for the submission of yearly financial returns.
Specifically, Insurance Act 2003 stipulates that underwriting firms, which failed to file the financial returns and accounts before the deadline, is liable to pay a fine of N5, 000 per day of default.
Sources at the commission told The Guardian that all the 19 underwriting companies, which failed to meet the deadline, would have to pay the fine as stipulated by law.
He said, “insurance business the world over is guided by rules, regulation and guidelines to conform to international best practices, therefore, an insurance company that failed to submit the financial returns and accounts at the stipulated time has to pay the penalty.”
A press release signed by Assistant Director, NAICOM, Lucky Fiakpa, said that a total of 42 of 61 insurance/reinsurance companies submitted their yearly accounts to the Commission for approval as at June 30, 2011. Out of the 42 that have so far submitted their accounts, 23 have been approved while 19 are at various stages of being approved. The report indicated that 19 underwriting companies are yet to submit their financial returns.
However, an industry chieftain told The Guardian that the industry are watching if the Commission would be able to enforce this section of the law to set an example for the future as the law does not respect any person, he said.
Section 26 of the Insurance Act 2003 states: (1) An insurer shall, not later than June 30 of each year submit in writing to the Commission the following (a) A balance sheet, duly audited showing the financial position of the insurance business of the insurer and its subscriber at the close of that year together with a copy of the relevant profit and loss account, which the insurer is to present to its shareholders at its yearly general meeting; (b) a revenue account applicable to each class of insurance business for which the insurer is required to keep a separate account of receipts and payments, and (c) a statement of investments representing the insurance funds.
Subsection (3) states an insurer, which fails, neglects or refuses to file the returns and accounts under this section is guilty of an offence and liable on conviction to a fine of N5,000 per day of default.
NAICOM source, however, told The Guardian that the new financial reporting format and accounting practise introduced by the Commission may be a challenge to the underwriting companies.
Said he, “the restructuring of the Financial Report Format and Accounting practices in the insurance industry resulting in the consequent release of the revised guidelines in 2010 in conformity with NASB and IFRS standards. The new guidelines imposed a more stringent requirement on the industry, which requires adjustment by operators and their external auditors. As a result, the initiative has resulted in better transparency and disclosure in the insurance industry as have been attested to by relevant stakeholders.”
He said, “the insurance sector, as part of the financial system is, no doubt, expected to play a vital role as we continue to move the economy forward. The sector represents an important component in the financial intermediation chain and remains the backbone of Nigeria’s risk management system.”