February 17, 2012
THE National Insurance Commission (NAICOM) has released guideline for developing risk management framework for insurers in the country.
The guideline sets minimum standard required from each and every insurer and reinsurer by which they can provide a reasonable assurance to the Commission, policy-holders, stakeholders and other stakeholders that the risks to which they are exposed are soundly and prudently managed.
The guideline, which shall come into effect from July 1, 2012, states that it shall be used by the Commission as a tool for conducting ongoing assessment of the risk management system of all insurers and reinsurers operating in Nigeria.
The guideline signed by the Commissioner for Insurance, Mr. Fola Daniel, dated February 13, 2012, states that risk management framework must, at a minimum, include documented risk management strategy, documented risk management policies, procedures and controls, a written business plan that is approved by the board and headed by a chief risk officer.
According to the guideline, the framework must address all material risks and should, as a minimum, cover market/investment risks, credit risk, operating risk liquidity risk, reinsurance risk, underwriting risk, claims management risks among others.
The guideline states, “all insurers and reinsurers shall establish a process of identifying, assessing, controlling, mitigating and monitoring all material risks. This must be developed, having regard to the company’s risk management philosophy, set of shared beliefs, attitudes, values, culture and operating style.”
Besides, all insurers and reinsurers must establish a risk management department that shall be responsible for measuring, monitoring and controlling risk, consistent with the established policies and procedures.