NIC sure of increased insurance penetration

BY: Ama Amankwah Baafi
Michael Andoh - Deputy Commissioner of Insurance

The Deputy Commissioner of Insurance, Michael Andoh, has said that the commission is working on a number of initiatives to shore up market development and improve financial resilience of regulated entities.

These he said include; risk-based supervision,a forward-looking supervision model that seeks to evaluate the risk profile of regulated entities and prioritise cash supervisory resources, on entities with high-risk profiles as well as the risk that pose the most threat to financial stability.

“Appropriate interventions are then made to mitigate such risks. Such interventions can include; enhancement of capital, improving risk management or other appropriate measures.”

This model deepens transparency, improves regulatory bites and ensures that regulated entities are able to put in place remedial measures quickly before the risk deteriorates,” he said on the second day of the 2022 investor webinar series by the Black Star Group (BSG) that focused on the insurance sector.

The webinar was on the theme, “The Future Starts Today: Effective Recovery, Resilience and Continuity Amidst Global Market shocks.”

He said that the NIC was implementing such a model to help to build resilience.

According to Mr Andoh, the best way to build resilience and reserves of insurers was the deployment of risk-based capital regime.

Hence, he said one of the key things the National Insurance Commission (NIC) was embarking upon was to enhance its solvency and capital adequacy framework.

“The technical specifications for the new risk-based capital framework, have therefore been issued to the insurance industry. The model is anchored on three pillars, quantitative requirements, supervisory reviews and reporting, disclosure and then market discipline,” he said.

He added that the model had the objective of ensuring that insurer’s capital was commensurate to the level of risk inherent in their operations.

New requirement

Mr Andoh said the NIC had worked closely with all regulated entities to ensure proactive approach to meeting the new requirement with minimal disruptions to the market.

He said globally, insurance regulation was moving away from compliance-based models to risk-based models, mainly because insurance risks were typically anchored on the level of exposures that insurers had.

“What we have witnessed generally is a shift towards creating regulation regimes that are characterised by higher standard for risk capital and solvency – the reason is that an insurer’s capital to unforeseen shocks or losses is determined by the capital of the insurer. Capital requirements are therefore prerequisite for growth and resilience of insurers and banks.”

“The NIC has been working on a regulatory framework that ensures capital sustainability, market resilience, growth and transformation of the insurance sector,” he said.

He cited that the rationale for the minimum capital adjustments are to enhance financial stability and soundness to ensure that insurers hold adequate capital to avoid unexpected losses and to increase market capacity.

“Currently, the insurance industry is small but has potential for growth. Adequate capitalisation would create the needed capacity for sustainable and profitable growth.”

“The recent challenge has been low market retention. It is expected that capitalisation improves the retention capacity,” he added.

Increasing penetration

Speaking on “Enhancing Insurance Penetration in Ghana and Promoting the Well-being of the Insuring Public for Economic Development,” the Chief Executive Officer of the Ghana Insurers Association (GIA), Dr. Kingsley Kwesi Kwabahson, noted the objective of increasing insurance penetration could not be achieved without promoting the well-being of the insuring public.

That he stated that it was at the core of the search for a magic wand to propel the insurer to contribute much more effectively to the Gross Domestic Product (GDP) of the country.

“Insurers have the task of developing the right products at the right price for the over 80 per cent workforce of the informal sector in Ghana using a need-based approach that does not only analyse this segment but importantly continuously innovate to meet the changing taste, preferences and challenges,” he said.

He said insurers had amply demonstrated that they empathised with the populace citing that the average daily claims and benefits paid were in excess of GH¢ 4.29 million.

“Beyond caring for the well-being of the citizenry, insurance can and does contribute to economic development through the long-term mobilisation of funds for infrastructure and the general development of the country as well as minimise the devastating effects of disasters,” he said.