NIC goes full hog on risk based supervision
Insurance companies in the country are now expected to maintain Internal Audit Units independent of operational management control as part of the Risk Based Supervision (RBS) adopted by the National Insurance Commission.
Advertisement
Under the RBS, the unit which is expected to have an oversight responsibility, is now expected to report directly to the board without the control of management.
“They are going to be independent of operational management. They should be resourced to their work so they could report to the board what their findings were,” the Commissioner of Insurance and Chief Executive Officer of the National Insurance Commission (NIC), Ms Lydia Lariba Bawa, told the Graphic Business.
Ms Bawa said the commission had rolled out the Risk Based Supervision model which identifies risks in the regulatory environment and pay attention so that we will ensure that companies that are making promises today will be there tomorrow to honour their promises.
The model is a departure from the compliance base supervision that most of the regulators of the financial system such as the Bank of Ghana used to do.
Compliance base supervision is where there are rules and the regulator expects every player to comply with. But it has come out that complying with just rules does not prevent companies from collapsing, but making sure that they identify and manage their risks actually helps them to be sustainable and continue in the business from year to year.
Many supervisors across the world have either switched over or are in the process of doing so, just as the NIC has started.
Ms Bawa said the indicators such as the capital requirements, capital adequacy and other risk base indicators had been set.
Other Trending Stories
The NIC had also started organising seminars for insurance companies, the latest being the board of directors of all insurance companies in the country, life- and non-life business, she said.
“We have organised seminars on corporate governance and risk management for all board members of insurance companies. We are in the process of sensitising the players and units within their operations to their role in the framework,” Mr Bawa told the Graphic Business.
Actuarial function
Another functional area that the Insurance Commission is developing is the actuarial function as they are needed to support the work of insurers, especially under a risk-based regime.
Due to the dearth of actuaries in the country, the NIC, as part of the RBS, is rolling out a strategy to produce actuaries in their numbers for the country, particularly the insurance industry.
“We are asking every company to set up an actuarial unit and as part of the Actuarial Development Strategy they are supposed to recruit people who they will train to the highest level to become certified professional actuaries,” she stated.
The objective is for every insurance company to have about two or three professional actuaries in the next 10 years to support the industry.
This is akin to a similar path the insurance company took in the past to fill the yawning lack of professional underwriters by training professional underwriters for the industry.
Currently, the Ghanaian insurance industry relies on consultancy from other actuaries from South Africa and elsewhere, hence the move to change the status quo.
Revising the Insurance Act
The NIC is also revising the Insurance Act, 2006 (Act 724), which will capture emerging issues both in the domestic environment and in the global market place.
The law, which has been gone through a first round of review up to Cabinet level, has reverted to the Commission which is now going to hold a retreat on it to consider new inputs.
“The Commission will hold a retreat on the law after which the industry will have an input before it is sent to the Ministry of Finance, the Attorney General’s Department and then to Cabinet. The first draft should be ready in 2017,” Ms Bawa stated.
The new bill will accommodate the changes such as the risk base supervision to provide the legal framework.
Advertisement