NIA tasks underwriters on economic rate for risks
THE Nigerian Insurers Association (NIA) has advised its 57 corporate members to charge economic rates for risk underwriting in the insurance market for the survival of the industry in the hostile business environment.
A source said the association is encouraged by the report that prices charged by reinsurers for annual contracts renewed this month declined for a second straight year.
Besides, The Guardian gathered that the association may be worried that members may decide to give rebate on rates to encourage customers to continue to insure their assets following the implementation of ‘No premium, no cover’ rule.
The effect of the regulation was indeed a general drop in premium income but a healthier cash flow, the source said, adding “policyholders resorted to short term (less than one year) covers and others refused to renew existing businesses or cut down on their insurances.”
The umbrella body of the risk managers, said that economic rates are sacrosanct and must be firmed up in the Nigerian market as it has been done the world over so that insurance firms would be able to meet obligations to stakeholders in the industry.
The source said “In charging insurance rates, members of the NIA should consider the risks involved scientifically in line with time tested principles of sound underwriting, while also taking due cognizance of claims experience of clients, good housekeeping, coupled with good and bad risks.”
The Director-General of the NIA, Sunday Thomas, speaking on the issue said the association appreciates and thanks our policyholders both corporate and individuals for their understanding and support for No premium, no cover’ policy enforced by the industry regulator, as it has brought to an end mountings volumes of premium receivables in the industry.
According to him, this is demonstration of the support for the role of insurance mechanism in mitigating risks in the national economy.
He explained, however, that between 2007 and 2009, the level of outstanding premiums produced was about 30 to 40 per cent of the industry’s funds outside the system, which has a serious impact on the performance of the industry.
Thomes said “This is one of the best things that has happened in the insurance industry in Nigeria. Many of the clients have adjusted immediately and they are now embracing the new system. We know that in two to three years down the line, the culture will readily improve premium collection in the industry”.
The NIA boss said the policy will enhance the performance of the industry in the payment of claims, improve the liquidity of underwriting firms, as well as meet the expectations of all stakeholders in the industry.
Reports indicate that reinsurance pricing fell in many segments, affecting almost all lines of business and geographies, continuing recent renewal trends, the reinsurance brokerage unit of Marsh & McKenna Cos (MMC) said in a statement.
“A major factor driving market conditions at the renewals was the lack of costly catastrophes”.
Reinsurers such as Munich Re, Swiss Re AG (SREN) and Hannover Re (HNR), which help primary insurers cover the costs of damage claims, are seeking to shore up earnings as lower losses from Inatural disasters and greater availability of capital weigh on prices. Global insured losses declined 25 per cent I 2014 to about $30billion, the lowest in four years the brokers said.