Nigeria Broadens Takaful Insurance Operations 

Yemisi Izuora 

In a bid to deepen Takaful insurance in the country, the National Insurance Commission, NAICOM, has thrown open the licensing of operators for Takaful insurance, bringing specialists outside mainstream insurance industry.

So far the NAICOM has licensed two such Takaful operators with another three at various conclusion stages. 

The agency has also concluded the process to license two such micro insurance operators with four other applications near conclusion and majority of the 

applicants are from outside the mainstream Insurance providers. 

Commissioner for insurance Mohammed Kari, while addressing the 2018 Insurance Industry National Conference in Abuja, explained that the Commission proactively developed and launched the Micro Insurance and Takaful, in response to the 2012, launch of the the National Financial Inclusion Strategy (NFIS) by government to reduce the percentage of adults that are excluded from financial services from 46.3 per cent in 2010 to 20 per cent in 2020. 

The strategic goals are driven by a broad range of coordinated  interventions, including simplified Know Your Customer (KYC) regulations, Agent banking, Microinsurance and Consumer Protection principles.

To achieve the set target, the strategy identified some of the key barriers to 

financial inclusions and measures to curtail them as, Lack of Income, Long distance to access points, Lack of knowledge about financial service, High cost of services, Cumbersome requirements.

Kari said the sector keyed into the initiative because, the insurance sector plays a vital role in all of these because it helps to reduce the poverty line, helping entities and individuals manage their risks and protects them from negative adverse effects of unforeseeable events. 

In realization of the National Financial Inclusion target for the Insurance sector and 

the need to deepened insurance penetration, NAICOM did focus on two objectives 

namely, Insurance awareness campaign for the financially excluded, Promoting the development of products and business models that meet, the needs of the these excluded groups.

To further achieve its objectives the Commission launched four (4) specific products lines as a bottom-up approach for the excluded and low income members of the society respectively. 

These are, Microinsurance, Bancassurance, Takaful insurance, and the Index Based Agricultural Insurance (IBAI).

He said though Insurance companies were permitted to offer the relevant products through “the window” models of operation, but upon gathering some experience the Commission reviewed the guidelines and upscaled the operations to specialist and dedicated licensing to entice specialist operators from within and without the Insurance industry. 

The Commissioner said, the Commission also entered into a collaboration and signed a Memorandum of Understanding with the Central Bank of Nigeria (CBN) on 

Bancassurance as a channel for increasing access to insurance products via the  banking platforms.

“Both apex regulators have since issued respective guidelines to 

their regulated entities in this regards. The Commission has so far granted approval  to six (6) insurance companies to transact in Bancassurance while the applications  of six (6) others are at different levels of approval.

Index Based Agricultural Insurance (IBAI) is a relatively new financial instrument for  transferring agricultural risks from individuals or groups of famers to risk carriers (insurers).

The Commission is collaborating with the Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) as a major partner in delivering its mandate under the insurance pillar facility and in the implementation of NIRSAL’s agricultural strategy.

Consequently, the Commission has granted approval to five (5) insurance companies to participate in the IBAI pilot scheme and will want to use this opportunity to once again implore more insurance companies to take advantage of this window and participate in the scheme. IBAI will help in providing financial support to rural and smallholders’ farmers since financial institutions will give out loans to people that have IBAI policy, hence reduce the financial pressure on farmers in case of unexpected threats that may result into lager losses”, Kari said.

 

According to him, The introduction of these new products and services created new challenges especially in the areas of capacity and expertise. To bridge these identified gaps, NAICOM conceptualized and consummated series of agreements with local and international bodies to assist in building capacity and expertise in the industry. 

In the area of Microinsurance, Kari said the NAICOM has been working with Deutsche Gesellschaft fur Internationale Zusammenarbeit Gmbh, GIZ of Germany and our own Enhancing Financial Innovation & Access (EFInA). The relationship with these two bodies have culminated in a well-documented diagnostic study of the Nigerian market, several seminars, workshops and trainings on Microinsurance for both operators and staff of NAICOM and the industry at large. 

Also, in December 2017, the Commission went a step further and invited the Toronto Center, Canada to conduct  a training session in Abuja for insurance operators and regulators in the West Africa Sub-Region. 

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