The Insurance Industry And The Exposure Draft on Mortgage Guarantee Companies In Nigeria

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Monday, October 22, 2018    09.37AM  / Open Letter By Ekerete Ola Gam-Ikon 


I have just finished my second reading of the Exposure Draft On The Regulation For The Operations Of Mortgage Guarantee Companies In Nigeria , Oct 19, 2018 and will like to make the following observations and suggestions:

  1. My understanding is that the creation and licensing of Mortgage Guarantee Companies (MGCs) is to protect the operations of mortgage lenders and safeguard their credit position from risks associated to their clients;
  2. On the basis of (1) above, I expected the Central Bank of Nigeria to explore how this objective could be achieved through the existing framework of Bancassurance which will allow insurance companies provide these services to mortgage lenders
  3. Mortgage guarantee, also known as mortgage insurance, exist as a product that insurance companies offer and it may be expedient to work with them to test the model and build expertise within Nigeria and avoid the hiccups of weak capacity as we have seen in few other sub-sectors of the financial services industry in Nigeria today;
  4. Section 8.4 - Risk Sharing - of this draft specifically states that some % of the risk "may be ceded to one or more mortgage re-insurers which have been licensed to operate in Nigeria" and this, in my opinion, amounts to reinventing the wheel as the insurance industry in Nigeria already provides such solutions;
  5. Therefore, I suggest that the leadership of the insurance industry be invited to submit its position on this and save CBN the challenges of creating a new sub-sector that would not operate optimally;
  6. Notwithstanding the response from the insurance industry, I suggest that CBN gives its Bancassurance Unit the assignment to collaborate with NAICOM and deliver solutions to the challenges of credit risks; and
  7. At a time that the Federal Government through the insurance regulator, NAICOM is going through recapitalization to strengthen the sector, I suggest that interested investors in MGCs be advised by CBN, after due consultations with NAICOM, to rather beef up the capital base of existing insurance companies thus putting them in a position to provide the protection and security needed by mortgage lenders.


Above all, the actions of CBN should be consolidating those of other regulators within the financial ecosystem rather than weaken them as this creation of MGCs will ultimately cause for the insurance industry which will lose the business of mortgage insurance and leave NAICOM as the weakest link in financial regulation in Nigeria.


Hoping you will find my observations and suggestions useful for your final submission.


** Ekerete Ola Gam-Ikon MNIM, CPP is an insurance consultant and can be reached vide


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