Omosehin demands stronger board oversight, prudent capital management and improved claims settlement as industry enters Risk-Based Capital era
By NIyi Jacobs
The National Insurance Commission (NAICOM) has warned insurance companies against assuming that increased capital alone guarantees financial stability, insisting that stronger corporate governance, effective risk management and prudent capital deployment will determine the industry’s success in the post-recapitalisation era.
The Commissioner for Insurance and Chief Executive of NAICOM, Mr Olusegun Ayo Omosehin, gave the warning on Thursday at the 8th Annual Insurance Directors’ Conference held at Marriott Hotel, Ikeja, Lagos.
Speaking on the theme, “Recapitalisation to Resilience: Leading the Risk-Based Capital (RBC) Era,” Omosehin said the successful completion of the industry’s recapitalisation exercise marked the beginning of a more demanding phase that would require insurance institutions to demonstrate their ability to manage risks, protect capital and meet policyholder obligations.
He commended shareholders, boards and management teams for their commitment and sacrifices towards the recapitalisation exercise but stressed that raising additional capital was not the ultimate objective.
According to him, the real test lies in how the strengthened capital is governed, protected, deployed and aligned with the risks undertaken by individual institutions.
“Recapitalisation was never the destination; it is the gateway to a more demanding phase — a phase that will be defined not by the size of capital alone, but by how that capital is governed, protected, deployed and aligned with risk,” he said.
Omosehin noted that the changing global insurance landscape, characterised by climate-related disasters, cyber threats, technological disruptions, economic volatility and geopolitical uncertainties, required insurance companies to adopt more sophisticated approaches to risk management.
He said changing consumer expectations, emerging technologies and evolving regulatory requirements were also reshaping the industry, making it necessary for insurers to become more innovative, technologically driven and financially resilient.
He maintained that Nigeria could not afford to remain outside the global transition towards risk-sensitive regulatory and solvency framewo
The Commissioner identified corporate governance as one of the most important determinants of the industry’s success following recapitalisation, urging directors to move beyond routine board meetings and become more actively involved in institutional oversight.
He said directors must challenge management assumptions, interrogate business strategies and ensure that major decisions are supported by adequate information and sound professional judgement.
Omosehin outlined strategic leadership, capital stewardship, effective risk governance, management accountability, internal controls and board effectiveness as key responsibilities requiring greater attention.
He warned that capital could be eroded through poor underwriting practices, excessive operating costs, inappropriate investments and uncontrolled business expansion if directors failed to exercise proper oversight.
He also called for stronger risk appetite frameworks and closer monitoring of underwriting concentrations, reinsurance arrangements, investment exposures, liquidity, credit risks and technology-related vulnerabilities.
The NAICOM chief further emphasised the need to strengthen internal audit, compliance, risk management and actuarial functions, noting that these departments must have adequate resources, independence and access to relevant board committees.
On board composition, he said insurance companies must ensure that their directors collectively possess the expertise required to oversee increasingly complex business operations, including insurance, finance, actuarial science, law, investment, technology and risk management.
He stressed that board membership was not an honorary position but one carrying significant fiduciary, professional and regulatory responsibilities.
Addressing the relationship between shareholders, boards and executive management, Omosehin acknowledged that investors would naturally expect improved returns and stronger institutional performance following the injection of additional capital.
He, however, cautioned that shareholder expectations must not override prudential considerations, compromise board independence or encourage unsustainable business strategies.
According to him, boards must retain the independence to make decisions in the long-term interests of their institutions, even when such decisions conflict with the immediate expectations of particular shareholders.
He also called for greater management accountability in the utilisation of institutional resources, regulatory compliance and implementation of board-approved strategies.
On the transition to Risk-Based Capital, the Commissioner explained that the Minimum Capital Requirement (MCR) and Risk-Based Capital (RBC) served complementary but distinct prudential purposes.
He said the MCR establishes the minimum capital threshold required for an insurance institution to undertake its licensed business, while RBC assesses the capital required to support the risks assumed by the institution.
He noted that an insurance company could satisfy its minimum capital requirement and still have insufficient capital relative to the nature, scale and complexity of its risk exposures.
Omosehin disclosed that NAICOM’s supervisory approach would increasingly focus on capital quality, risk management frameworks, governance effectiveness, institutional resilience and the ability of insurance companies to meet their obligations to policyholders.
He said the Commission would also place greater emphasis on the accuracy, completeness and timeliness of regulatory returns, financial reports, actuarial assessments and institutional disclosures.
He warned that successful recapitalisation did not exempt insurance companies from continuous regulatory scrutiny, stressing that maintaining capital adequacy and regulatory compliance remained an ongoing responsibility.
He urged insurance institutions to maintain transparent and constructive engagement with the Commission, particularly when significant developments or emerging vulnerabilities could affect their financial positions.
The Commissioner said the benefits of recapitalisation should extend beyond individual insurance companies to the wider Nigerian economy.
According to him, a financially stronger insurance industry would be better positioned to support investments in infrastructure, energy, manufacturing, agriculture, construction and other strategic sectors.
He also identified opportunities for increasing domestic risk-retention capacity, reducing dependence on foreign insurance markets and strengthening the industry’s contribution to long-term institutional investment.
He said improved institutional capacity could also help expand insurance penetration, promote affordable insurance products and advance financial inclusion.
Omosehin, however, challenged insurance companies to translate their stronger capital positions into improved underwriting capacity, innovative products, efficient service delivery and greater support for productive economic activities.
He maintained that the industry must become more visible, accessible and relevant to Nigerians if it hoped to deepen public confidence.
Emphasising the importance of public confidence, Omosehin said the ultimate measure of an insurance company’s strength was not merely its capital base but its ability and willingness to honour contractual obligations when claims arose.
He described insurance as a promise of financial protection, noting that policyholders ultimately judged companies by how they responded when they needed that protection.
He therefore urged boards to place policyholder protection at the centre of their corporate strategies, particularly by strengthening claims management and ensuring prompt and fair settlement of legitimate claims.
The Commissioner also underscored the importance of compliance with Fit and Proper requirements, describing the framework as a fundamental safeguard for effective corporate governance.
He said appointments to boards and senior management positions must be based on competence, character, qualifications, experience, reputation and ethical standing rather than status, influence or personal relationships.
He added that boards had a responsibility to continuously assess and monitor the suitability of directors and senior executives throughout their tenur
In his concluding remarks, Omosehin challenged insurance directors to demonstrate that the recapitalisation exercise had produced stronger institutions capable of withstanding economic shocks and contributing meaningfully to national development.
He urged directors to critically examine whether their institutions were genuinely stronger, whether their boards possessed the expertise to challenge management decisions and whether additional capital was being deployed prudently.
He also called on them to ensure that the gains of recapitalisation translated into improved underwriting capacity, better claims settlement, stronger policyholder confidence and greater economic impact.
Describing directors as custodians of policyholders’ trust, stewards of shareholders’ investments and guardians of institutional integrity, he said the decisions taken in boardrooms would determine the future competitiveness and credibility of the Nigerian insurance industry.
He expressed the hope that the post-recapitalisation period would be remembered not simply as a time when insurance companies raised more capital, but as a defining period of improved governance, stronger institutions and greater relevance to national economic development.
