NAICOM set to categorize insurance brokers into 2
The National Insurance Commission (NAICOM) is preparing to categorise insurance brokers into corporate broker and partnership broker with licensing fees of N5 million and N3 million respectively.
The brokers with 500 broking firms before now operated as corporate brokers, with a licensing fee of N2.5 million.
The development is coming on the heels of NAICOM’s move to recapitalise, strengthen and boost the image of the insurance industry. Last month it announced plans to recategorise insurance companies into three tiers.
NAICOM in a draft guideline for the regulation of insurance brokers in Nigeria, issued in June this year to all insurance broking firms, stated that in the proposed regime, brokers would operate two-tier mode – corporate and partnership.
It said investors seeking corporate license have to pay nonrefundable application fee of N500,000 and those for partnership licence N300,000, adding that every insurance broker shall upon successful conclusion of the registration process but prior to issuance of a license, pay a licensing fee of N4.5 million for corporate and N2.7 million. This, added with the application fee, amounts to N5 million and N3 million respectively.
NAICOM said every insurance broker shall pay bi-annual licence renewal fees of N1 million for corporate and N600,000 for partnership, adding that corporate brokers would maintain a professional indemnity cover of not less than N10 million, which is N100 million in the case of oil and gas insurance brokerage or 50 per cent of its annual brokerage income for the preceding year, whichever is the greater. Partnership operators will have a professional indemnity cover of not less than N5 million, which is N50 million in case of oil and gas insurance brokerage or 50 per cent of its annual brokerage income for the preceding year, whichever is the greater.
NCRIB President, Shola Tinubu while speaking in Lagos said it is clear that NAICOM is looking at two different categorise of brokers.
He said this is coming from the fact that in Insurance Act 2003, there is a provision for two types of brokers or two procedures for which brokers can exits.
He said the first is to be limited liability broker and the other is partnership broker.
He explained that this is how it was presented in the 2003 Act noting that for registration purposes, only processes that can enable people register as a limited liability broker has been published by NAICOM.
He said: “Therefore, all brokers that exist have only used this medium to register. This is the history. But subsequent to that when brokers were challenged on the issue of financial reporting council asking them to bring a leg and an arm to register and to comply with the new corporate governance guidelines among others, many brokers began thinking that they were asking them to comply with too many things.
“And then it was muted by the brokers informally between Financial Reporting Council (FRC) and NAICOM during the tenure of the former commissioner that they wanted to move towards the partnership arrangement at least to make the option available and ease administrative burden.
“The idea was muted by the regulators that if you work as partnership and there are several things you do not do as a broker that reduce the risk to the public, then it is possible that we may not need to regulate you as tightly as we if you do the whole gambit of services that brokers perform. Based on this, some brokers started to clamor internally at the Council to move towards the partnership arrangement.
“I think it is with this history in mind that the present leadership within the commission decided to look into how this could happen. So where the regulators are coming from is understood but how they will express it is like when you say the “devil is in the detail” and when we look at the detail, we may not be fully satisfied with some part of it.
“Even as we sent the zero guideline out, our members are coming back to say they are not sure they want any form of categorization any longer. The requirements for this came from brokers initially in terms of what they were told could ease the administrative burden of broking if they were to have a broker that is not participating in all the gambits of things that insurance brokers do.”