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Principles-Based Regulations: A Model for Legal Reform in the Nigerian Insurance Industry

Published online by Cambridge University Press:  19 March 2015

Yeside Oyetayo
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Abstract

The development of global standards has led to a convergence in domestic regulations in the financial services sectors. Principles-based regulations (PBRs) have become essential for effective regulatory efforts in insurance and other financial services because of their flexibility, support for regulatory efficiency and the development of a good compliance culture amongst the regulated. The legal framework of the Nigerian insurance industry mainly contains prescriptive and performance-based regimes that have become ineffective as regulatory strategies. This article recommends the adoption of PBRs from available models found in international standard setting organizations such as the International Association of Insurance Supervisors, other jurisdictions such as the UK's Prudential Regulation Authority and Financial Conduct Authority, together with international trade regimes such as the General Agreement on Trade in Services. It reviews aspects of Nigerian insurance industry regulations supporting PBRs and highlights laws not supportive of PBRs and therefore requiring reform.

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Type
Research Article
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Journal of African Law , Volume 59 , Issue 1 , April 2015, pp. 64 - 84
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Copyright
Copyright © SOAS, University of London 2015 

INTRODUCTION

The soundness of an insurance market is directly related to the soundness of its legal and supervisory structures. Unlike the regulation of banks, which focuses on systemic risk prevention, the goal of the regulation of non-bank financial institutions (such as in the insurance sector) is primarily to prevent market failures that may arise through market manipulation, imperfect information and contract failure.Footnote 1 While contract failure may be associated with risks of fraud,Footnote 2 insolvencyFootnote 3 and equity (often referred to as acquum et bonum Footnote 4 [moral obligations of insurers]), market manipulation and imperfect information are abuses resulting from private or inadequate information situations that prevent effective competition in the insurance industry. Mattoo and Stern have noted the importance of the introduction of genuine competition and the building of regulatory institutions as possible solutions to market failures.Footnote 5 This would be hinged on information disclosure, monitoring and auditing, and enforcement.Footnote 6

Regulating and monitoring have an equally significant effect on the performance of insurance markets both within the domestic landscape and globally. There is growing interdependence amongst nations, resulting in the convergence of rules and regulations. Countries cannot operate in isolation of global trends, hence the growing impetus especially among developing countries to fashion their regulatory framework after globally accepted standards. Though this may have some undesirable effect on domestic regulatory autonomy,Footnote 7 countries sometimes need to make trade-offs to secure better living standards for their citizens. The growing linkages between the national and international levels have given rise to challenges in government regulatory activities especially with regard to developing countries' participation in international trade in insurance services [and] the trend towards the harmonization of prudential measures as well as the development of international standards for insurance services”.Footnote 8

Legal reform is an effective tool for drafting regulations that emphasize competition and support a viable insurance market. It could include any or all of “developing a home grown system”, “local adaptation of an existing foreign legal regime”, “reception of foreign law”, “adoption of model laws and of model clauses”, “harmonization and other techniques of regulatory convergence” or the “adoption of international financial standards”.Footnote 9 Though the utility of legal reforms is challenged in some empirical studies,Footnote 10 developing countries like Nigeria need reforms to improve the quality of the laws and the institutions responsible for enacting and enforcing laws and regulations.Footnote 11 Furthermore, all reforms need to establish clear benchmarks to serve as a standard for measuring their success or failure.Footnote 12 Therefore, this article examines globally accepted standards together with legal frameworks incorporating principles and risk-based regulations as a model for reform of the Nigerian insurance sector.

OVERVIEW OF THE NIGERIAN INSURANCE INDUSTRY

The Nigerian Insurance Industry (NII) is one of the biggest insurance markets in Africa, ranked 60th in the world in 2011 behind those of South Africa, Morocco and Egypt which were 17th, 53rd and 58th respectively.Footnote 13 Statistics on premium generation in Africa also rank Nigeria fourth after South Africa, Morocco and Egypt.Footnote 14 The country is in 86th position behind nine other African countries in global insurance penetration and density figures, as a percentage of GDP.Footnote 15 These figures are dismal considering the abundant human and capital resources in Nigeria. The NII contributes less than 1 per cent to Nigeria's GDP, compared to almost 13 per cent in South Africa, mainly from life insurance premiums.

Structural inadequacies in the NII impugn on the public acceptability and sustainable growthFootnote 16 of the sector, thus accounting for its low contribution to GDP in Nigeria. These inadequacies relate to ineffective and unreliable service delivery systems, “responsiveness” (prompt service delivery), “competence”, “access” (approachability and ease of contact) and “credibility”, among others.Footnote 17 This is corroborated by the acknowledgement by the Nigerian National Insurance Commission (NAICOM) that “weak insurance companies”, “poor compliance culture”, “inadequate legislative and legal framework”, “poor public perception of NAICOM as a regulator” and “public resistance to insurance”Footnote 18 form part of the problems. Consequently, the weak regulatory framework, coupled with sharp practices,Footnote 19 has also led to image problems, made worse by low levels of consumer awareness.Footnote 20 Furthermore, the pace of technological change is slow and the payment of insurance claims is often delayed. These circumstances impact negatively on sales in personal insurance lines, so most premiums are generated from corporate and government clients, leaving the potential available from Nigeria's large population untapped.Footnote 21

Corruption is another pervasive challenge in Nigeria, although it has been criminalized under various lawsFootnote 22 dealing with corrupt practices generally or specifically in the financial sector.Footnote 23 However, because the level of corruption depends on the possibility of perpetrators being caught, corruption thrives in insurance, particularly because of the lack of transparency in the supervision and administration of the NII.

Nevertheless, it is argued that effective institutional and legal reforms will create a strong independent and transparent supervisory body and regime, while facilitating the easier detection of fraud and the effective enforcement of sanctions.Footnote 24 These would however require the adoption of international standards in practice, legislation and supervision to improve consumer awareness and industry / market conduct. The adoption of risk and principles-based regulations would ensure the efficient allocation of resources and proper risk management among insurers, while aiding the development of a financially sound sector.

WHAT ARE PRINCIPLES-BASED REGULATIONS?

Principles-based regulations (PBRs) are outcome focused regulations that concentrate on the goals and objectives of regulations rather than their processes. They enhance sound market principles by integrating them into supervisory activities and operationalizing their importance.Footnote 25

There are different forms of PBRsFootnote 26 such as formal PBRs, which contain broadly worded principles or rules setting standards, and substantive PBRs that involve regulatory conversations between the regulator and the regulated, both of whom share responsibility for interpreting the principles and rules while dispute resolution is through “consequentialist reasoning”.Footnote 27 Full PBR combines the characteristics of formal and substantive PBRs, while polycentric PBR is a form of PBR that extends the network of interpreters to include trades unions, consultants and experts who may also monitor enforcement of the principles.Footnote 28 For the purposes of market efficiency, accountability and transparency, polycentric PBR is being canvassed to support reform in the NII.

Nonetheless, it is pertinent to note that a “high level of trust between all the participants in the regulatory regime” is germane for the successful application of PBRs.Footnote 29 This would eliminate the paradoxes inherent in the application of PBR regimes.Footnote 30

PBRs represent a movement away from dictatorial regulations in the form of detailed, prescriptive rules and supervisory actions that instruct firms how to operate their business. Rather, they give firms responsibility for determining the best way to align business objectives and processes with specified regulatory outcomes. Pursuant to this strategy, the Financial Conduct Authority (FCA) in the UK shifted “towards setting out desirable regulatory outcomes in principles and outcome-focused rules”.Footnote 31 This enables FCA regulatory staff to “engage with firms' senior management in pursuit of these outcomes”.Footnote 32

Therefore, PBR is a regulatory strategy that allows firms to determine how to meet regulatory demands while working with regulatory staff to achieve this. It affords flexibility and facilitates innovation and an ethical compliance culture. It thus creates responsible organizations which organize their processes in line with the framework of regulatory principles. PBR fosters competition and uses minimally intrusive regulations that facilitate prudent and solvent markets and a strong regulatory and supervisory body, thus ensuring effective administration and fair competition within the market.Footnote 33

PBRs have become a necessity because of the inherent inadequacies and complexity of prescriptive rules accounting for their failure to prevent market misconduct and their propensity to divert attention from the purpose of regulatory standards towards adherence to the letter of the rules.Footnote 34 Besides, the constantly changing face of financial markets and innovations in financial products require dynamic regulations with the ability to respond at the pace of changing markets.Footnote 35

The advantages offered by PBRs include engagement with senior management, fostering substantive compliance and promoting behaviour that is commensurate with the regulatory objectives. PBRs focus on regulatory purpose and offer flexibility in regulatory compliance, thereby creating an impetus for the development of new business models, strategies and internal processes. They enhance the responsiveness of regulations to market developments, thereby making principles more durable and dynamic. Most importantly, PBRs facilitate open dialogue between the regulator and the regulated thereby creating a “cooperative and educative approach to supervision”.Footnote 36 Though there are inherent challenges relating to the use of PBR as a regulatory strategy,Footnote 37 its adoption is recommended for regulating the NII, which is currently mainly prescriptive and inadequate for domestic market efficiency and the insurance trade. Reforms that put PBRs in the legislative and supervisory framework of the NII will address problems of market misconduct and failures, while being sufficiently flexible to accommodate changes in the insurance sector.

INSURANCE MODEL PRINCIPLES

Regulatory models for the insurance sector are available in relevant international bodies, international agreements and in other jurisdictions with a similar legal structure. The International Association of Insurance Supervisors (IAIS) and the General Agreement on Trade in Services (GATS) (of both of which Nigeria is a member) provide globally accepted regulatory principles. In addition, GATS provides trade-enhancing regulatory models for insurance which could facilitate Nigeria's participation in global trade in insurance. The UK, from which the Nigerian legal system derives its common law nature, also operates a principles-based financial supervisory regime which is adaptable to the NII legal framework. None of these models is binding on Nigeria, except that Nigeria may already have obligations under GATS in some service sectors like insurance and banking where Nigeria has scheduled commitments.Footnote 38

IAIS principles

The IAIS principlesFootnote 39 are embedded in the recently modified Insurance Core Principles.Footnote 40 These principles, derived from consensus, are evidence of global regulatory convergence that has become the trend in international financial regulation. It is notable that they facilitate “sound regulatory and supervisory systems” by providing principles which ensure “a fair, safe and stable insurance sector for the benefit and protection of the interests of policyholders, beneficiaries and claimants” while “contributing to the stability of the financial system”.Footnote 41 They emphasize the goals of insurance regulations and include:

  1. (1) Clear definition of the regulator's objectives, powers and responsibilities through primary legislation.

  2. (2) An operationally independent supervisor that is accountable and transparent, with appropriate legal protection, adequate resources and high professional standards. Accountability is three-fold to the supervised, the government and the public, while operational independence requires freedom from undue influence from any quarter.

  3. (3) Information exchange with other relevant regulators.

  4. (4) A clear, objective, public and consistent licensing procedure.

  5. (5) Suitability of members of the board, and senior officers.

  6. (6) Establishment of a corporate governance framework to facilitate sound and prudent management of insurance business that protects policyholders' interests.

  7. (7) Establishment of effective risk management and internal control systems for compliance with regulatory and prudential requirements.

  8. (8) Establishment of an integrated risk-based system of supervision, using both on-site and off-site inspection as a means of gathering necessary information for effective supervision.

  9. (9) Implementation of timely and suitable preventive and corrective measures where applicable to achieve supervisory objectives.

  10. (10) Enforcement of publicly disclosed corrective actions or sanctions.

  11. (11) Setting acceptable standards for reinsurance and general risk transfer, together with transparent reporting of such activities.

  12. (12) Timely public disclosure by insurers of relevant, comprehensive and adequate information to policyholders, the public and market participants for the purpose of enhancing market discipline and understanding insurers' risk portfolios.

  13. (13) Enterprise risk management.

  14. (14) Anti-money laundering provisions.

The UK Financial Conduct Authority

The FCA is charged with the responsibility of regulating the UK insurance industry (after which the NII is fashioned) and has in place principles for businesses, focussing on firms' behaviour, and for good regulations to guide their supervisors.

The 11 principles for businesses are “axiomatic statements” detailing the actions and behaviours expected from firms, while at the same time serving as the backbone of the FCA regulatory regime. They are general statements of the fundamental obligations under the FCA regulatory system. As noted by Black, Hopper and Band,Footnote 42 they are framed in general, qualitative and evaluative terms, containing mainly behavioural standardsFootnote 43 that place more responsibilities on firms' senior management.Footnote 44 Outcomes, rather than processes or procedures, are emphasized.Footnote 45 The business principles are:Footnote 46

“

  1. 1. A firm must conduct its business with integrity.

  2. 2. A firm must conduct its business with due skill, care and diligence.

  3. 3. A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.

  4. 4. A firm must maintain adequate financial resources.

  5. 5. A firm must observe proper standards of market conduct.

  6. 6. A firm must pay due regard to the interests of its customers and treat them fairly.

  7. 7. A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.

  8. 8. A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.

  9. 9. A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment.

  10. 10. A firm must arrange adequate protection for its clients' assets when it is responsible for them.

  11. 11. A firm must deal with its regulators in an open and cooperative way, and must disclose to the appropriate regulator appropriately anything relating to the firm of which that regulator would reasonably expect notice.

”

The FCA's Principles of Good Regulations,Footnote 47 made mandatory by the Financial Services Act 2012, also offer significant benchmarks for effective and efficient regulations in the NII. They include: efficiency and economy of resources; management's responsibility for compliance with regulatory requirements; proportionality by ensuring that the cost of regulations does not outweigh the benefit derived from them; innovation in compliance with regulations, ensuring that those who are regulated devise innovative means of complying rather than restricting them to particular methods; the international character of regulations, through co-operation with regulators in other jurisdictions in order to agree to international standards and global monitoring firms; fostering competition and avoiding unnecessary barriers to the entry or exit of firms from the market; and public awareness aimed at fostering public understanding and knowledge of financial matters.

These principles highlight proportionality, efficiency of resources, competition, public awareness, internationalization of regulations and responsibility of management. The principle of proportionality connects “legal and economic assessments of a regulatory action”.Footnote 48 Without proportionality, regulations become unreasonable and burdensome, and hinder competition and growth in the sector. In a nutshell, regulatory efficiency and effectiveness are key to a competitive and viable insurance market. Proportionality is one of the principles employed in the assessment of domestic regulation under GATS and the European Union. Therefore, apart from strengthening domestic market efficiency, proportionality of regulations is germane for the insurance services trade. These principles of good regulation are therefore all-encompassing, making them a good model for legal reform in the NII.

GATS model

GATS also contains regulatory principles that allow members to supplement domestic reforms for growth and development with binding commitments, while also operating as a model for regulatory reforms for a market with a global focus. The GATS model promotes “greater competition in the market and non-discrimination against foreign services and service suppliers”Footnote 49 thereby leading to a more rational and economic market structure. Although the general obligations under GATS are the most favoured nation principle and transparency,Footnote 50 the unique features it possesses include the definition of trade, distinction between general obligations and specific commitments (complemented by the bottom-up approach), progressive liberalization and domestic regulation requirements, technical co-operation and so on. Furthermore, the principles of market access and national treatment, among others, provide for an efficient and trade friendly regulatory structure, noted for its efficacy in regulations geared towards market openness.Footnote 51 Trade in GATS is also defined along the four modesFootnote 52 of supply which have become “canonical” in the definition of trade in services,Footnote 53 in academic analysis, trade policy-making and trade agreements on services.Footnote 54

Cross border supply “from the territory of one member into the territory of another member” involves the supplier remaining in its country of operation and supplying services to consumers in other countries. Both buyer and seller remain in their individual positions. This is often the practice in reinsurance business where insurance companies buy their reinsurance covers from reinsurance firms outside their jurisdictions. The UK and Germany have a substantial reinsurance market with customers from both developed and developing countries. Consumption abroad mode involves the consumer moving to the supplier's country to purchase its services. Examples are found in the insurance of special classes involving large sums insured, such as oil and gas, aviation and marine insurances, and sometimes in health insurance where the insured may need to purchase cover outside its country where the expertise and capacity exist for such classes. An interesting overlap could exist in the purchase of health insurance policies, which may technically involve elements of both cross border supply and consumption abroad.Footnote 55 It is important to note however that the consumption abroad mode of supply is usually outside the control of countries, because people are free to move in and out of the country so long as they have the required documents to do so. However, regulations can be put in place to put such transactions under the ambit of the law.

Commercial presence is the third mode of supply. This involves foreign suppliers maintaining a local presence in another country. Here, the foreign service-provider actually establishes its presence by fulfilling the necessary conditions of its host country through a branch, joint venture, franchise or licensing. Many insurance companies set up operations outside their country of registration. Similarly, many UK registered insurance companies used to exist in this form in Nigeria in the 1950s and 1960s before the indigenization programmes of the 1970s.Footnote 56

The last mode of trade in insurance services is the temporary movement of natural persons into the territory of other members. This often involves professionals going to the host country for the purpose of offering particular services. In insurance services this includes the movement of international loss adjusters from European countries or the US for the purpose of adjusting claims in highly specialized classes of insurance.

As a model for regulatory reforms, the definition of trade in services in GATS would therefore help to structure Nigerian trade policy and domestic regulations in insurance to reflect the various modes of trade. It would also ensure that adequate regulatory provisions are made for each mode, bearing in mind the effect each would have on the domestic situation of the NII. For example, the legislative framework of the NII has no provision for the “consumption abroad” mode of trade in insurance services, which exists mainly in the area of health insurance in Nigeria.Footnote 57 As stated, such transactions are outside the control of NAICOM or other regulatory agencies because people are free to move in and out of the country so long as they have the required travel documents.

Furthermore, article VI of GATS encapsulates the domestic regulatory principles offered by this framework and contains constraints on “excessive regulations”.Footnote 58 These principles include:

Reasonableness, objectivity and impartialityFootnote 59

These require reasonableness, objectivity and impartiality in licensing, standards and qualification in specifically committed sectors. Reasonableness connotes being within the standards of “rationality and sound judgment”Footnote 60 and is evaluated by ends / means, cost effectiveness and proportionality tests.Footnote 61 This must be reflected in both the substance and process of government measures.Footnote 62 Reasonableness will ensure that African countries' administration of domestic insurance regulations is not unfavourable to international trade in services.

Objectivity involves a process devoid of irrational, emotional or personal intentionsFootnote 63 and relates to the regulatory objectives of African countries in their respective jurisdictions. Impartiality however connotes not giving consideration or privileges to other parties or interests.Footnote 64 All three are absolute standards of treatment, which require rationality, proportionality, transparency, necessity and participation.Footnote 65

Remedial processes

Judicial, arbitral or administrative processes which provide remedies for administrative decisions affecting service providers are mandatory. This implies a system of recourse to an objective and independent process for the prompt review or provision of remedies for unfavourable administrative decisions.

Prompt authorization

In sectors where authorization is compulsory for foreign suppliers, members are obliged to obtain authorization within a reasonable time. While no definition of reasonable time is given, it is noted that obligations of this nature have some flexibility, especially in relation to developing countries like Nigeria.Footnote 66

International standards

The licensing, qualification and technical standards requirements of members must reflect the standards of relevant international organizations. This includes organizations like the IAIS, International Insurance Society, International Actuarial Association or International Organization of Pension Supervisors, of which the IAIS, which represents insurance regulators globally, is the most prominent. The implication for Nigeria is that these organizations' standards need to be adopted, because they are benchmarks for evaluating domestic regulations and a means for testing conformity to international obligations.

Prudential carve out

The Agreement on Financial Services in the annex to GATS excludes prudential domestic regulations from the lists of barriers which GATS seeks to eliminate. This is significant for African countries because it provides the mandate to use measures deemed necessary to protect financial markets and relieves countries of the burden of having to prove that necessity.

In summary, the GATS regulatory principles contained in market access, national treatment and domestic regulation provisionsFootnote 67 offer models for an efficient and trade friendly regulatory structure geared towards market openness.Footnote 68

PBRs IN THE NII LEGISLATIVE FRAMEWORK

This section reviews the extent to which principles have been incorporated into insurance laws in Nigeria. The main legislation in the NII is the Insurance Act of 2003 (IA) and the National Insurance Commission Act, together with the annual guidelines issued by NAICOM, the supervisory agency. Although other laws exist within the legislative framework of financial services that affects the insurance industry,Footnote 69 the focus of this article is on the legal reforms necessary in respect of the main laws.

Regulatory instruments supporting PBRs

Though no explicit reference or provision is made for principles in the IA, requirements relating to reasonableness and the rule of law could be implied into some provisions of the act, such as those relating to the winding-up of insurance companies. These empower all stakeholders to protect their interests before the court. For example, a petition for winding-upFootnote 70 in the IA may emanate from the policyholders with NAICOM's approval or from NAICOM itself.Footnote 71 However, insurers involved in life insurance businesses may not be wound-up voluntarily, except for the purpose of amalgamation, transfer or acquisition under the act.Footnote 72 This protects policyholders' interests in accumulated life funds which may be lost in such circumstances.

Nonetheless, significant evidence of the adoption of PBRs in the NII is found in the NAICOM Code of Good Corporate Governance for Insurance Industry in Nigeria and the Know Your Customer (KYC) Guidelines. The code was NAICOM's first attempt at PBRs; it stressed the principles of good governance, accounting disclosure and transparency. The code made provisions for a proactive, responsive and committed board. It also covers compliance to rules and regulation, the exercise of shareholders' rights and unambiguous disclosure of insurance firms' financial condition, while stressing transparency in organizational operations.Footnote 73 This regulation complements the IA provision for a code of conductFootnote 74 and emphasizes the need for corporate governance to ensure competitiveness and integrity. It made provisions for the constitution of the boards of insurance companies, board committees and meetings. It also required the application of accounting principles in accordance with international accounting standards. This code for the first time made the board of an insurance company the focal point in corporate governance, in line with the requirements of the IAIS Core Principles on Corporate Governance.Footnote 75 These provisions have the potential effectively to promote high ethical standards and, ultimately, the desired public trust in the NII needed for the industry to grow and develop.

The KYC GuidelinesFootnote 76 are another principle-based measure. They derive partly from the IAIS Insurance Core Principles on Fraud and Anti-Money LaunderingFootnote 77 and also respond to the customer identification programme that the Money Laundering (Prohibition) Act of 2004 introduced into Nigeria. The guidelines mandate all financial institutions to verify a customer's identity and address before establishing any fiduciary transaction or business relationship.Footnote 78 They have positive implications for Nigeria's trade in insurance because they promote transparency and the integrity of the NII.

Furthermore, NAICOM's 2011 guidelinesFootnote 79 represent a step towards the adoption of international standards in financial reporting, with the agency requesting an international financial reporting standards conversion plan from insurers and reinsurers following its adoption by Nigeria's Federal Government.

Regulatory instruments inconsistent with PBRs

Regulations not supporting competition

There are three major regulatory approaches to insurance services,Footnote 80 but the competition approach is the most efficient because it facilitates the efficient allocation of resources in the domestic market while encouraging the entrance of new participants into the insurance market. Consequently, some regulatory strategies result in inadequate capacity due to distortions of market forces. The structure of the insurance industry is made unstable by inefficient or ineffective regulatory environments. For example, restrictive licensing and requirements which impede the access of new firms and productsFootnote 81 have negative influences on development and result in low quality insurance products with higher premiums, such as are faced by developing countries that pursue protectionist strategies. In the NII, the requirement for written permission before reinsurers and loss adjusters are appointed is highly restrictive. PBRs which focus on solvency goals (“proper standards of market conduct”)Footnote 82 would ensure that insurers exercise reasonable caution in these transactions than is the case under the current prescriptive regimes.

Prescriptive regimes are traditional regimes prescribing to the regulated “what to do and how to do it”Footnote 83 often used to regulate insurance sectors in developing countries. NII regulations are mainly prescriptive with laws handed down to the industry without contributions from stakeholders. However, since Nigeria's return to democracy in 1999, a more liberal approach has been adopted in the enactment of insurance legislation because contributions are encouraged from all stakeholders. The adoption of a system and performance-based regime that focus on the system / process and goals respectively,Footnote 84 as in developed insurance markets, will complement the traditional regime. They are fairly voluntary and industry-led, leaving the industry with the prerogative to decide the mode of achieving regulatory goals. These restrictive elements have serious negative implications for the growth of the NII.

Regulations not supporting transparency and public trust

Transparency literally means a state of being “easy to perceive” or “open to public scrutiny”.Footnote 85 The principle of transparency requires that information on laws, regulations and their administration and procedures should be readily provided and available to interested parties.Footnote 86 Transparency could also be defined as the “capacity of regulated entities to, identify, understand and express views on their obligations under the rule of law”.Footnote 87 Transparency is therefore a quality of regulation and supervision which enhances the effectiveness of regulatory action.

The publication of the IA and other related legislation demonstrates elements of transparency and public availability. For illustration, almost all the laws relevant to regulation of the NII are available on electronic media, in government offices and at Nigerian embassies all over the world. There are also transparency provisions in the IA regarding financial statements and reports. By law these are required to be publicly available so that they can be accessed by interested parties who may be looking to invest in those companies. The IA also provides that insurers should publish their “general annual balance sheet together with its profit and loss accounts in at least one newspaper having wide circulation in Nigeria”.Footnote 88 The statements must first be approved by NAICOM. This provision is important and contributes to the general transparency of the NII. Equally important is the commission's oversight function to ensure that the statements are in order before being published in the newspaper.

Disappointingly, one of the desired effects of the provision, to allow the public to make informed decisions about companies, may not be achieved. There are problems with placing an appropriate value on insurance stocksFootnote 89 in Nigeria because the financial reports of insurance companies in NII are opaque and do not follow recognized international standards. This has restricted investment in the sector. Consequently, stocks of Nigerian insurance companies perform poorly at the Nigerian Stock Exchange. However, with the NAICOM directive on the international financial reporting standards conversion plan,Footnote 90 insurance companies are expected to adopt a recognized standard soon.

Significantly, supervisory transparency also involves transparency in the monitoring and enforcement of rules by supervisory agencies. This sometimes encompasses regulatory transparency where the supervisory agency has been delegated powers to make rules and regulations.Footnote 91 This is closely related to accountability where public office holders are made accountable for their actions. The centrality of accountability for good quality of government and governance has been emphasized by classical theoristsFootnote 92 like LockeFootnote 93 and Montesquieu,Footnote 94 and in recent empirical works of La Porta et al,Footnote 95 Olken,Footnote 96 Bjorkman and Svensson,Footnote 97 and Ferraz and Finan.Footnote 98

Djankov et al found that, although many countries have disclosure laws, the majority have extremely limited disclosure available to the public because the law does not require it.Footnote 99 The IAIS however provides model standards for supervision and regulation, including for transparency and accountability. The supervisory process requires transparency and accountability of the supervisory authority in the conduct of its functions.Footnote 100 This involves public knowledge of and appropriate consultation on the supervisory process, to ensure the “effectiveness and credibility of the supervisor”.Footnote 101 It is therefore a requirement that written information about the supervisory agency and its activities be made available to the public. It is also obligatory for the text of proposed and existing substantive and procedural rules to be available, including information on how the public can make enquiries of officials. The supervisory authority must also be accountable for its actions to government and others from whom it has been delegated authority, to insurance and other firms it supervises, and to the public at large. This includes providing a rationale for actions taken.Footnote 102

Among the essential criteria for this principle is the adoption of “clear, transparent and consistent regulatory and supervisory processes” with the mandatory publication and updating of “rules and procedures of the supervisory authority”.Footnote 103 Also included is the public availability of information on the agency's role. Furthermore, the agency's administrative decisions should be “subject to substantive judicial review”.Footnote 104

These global standards and principles of transparency, which are currently not available in the NII regulations, would be good models of reform in the insurance industry.

Minimum capital requirement

The requirement for minimum capital is a major regulatory challenge to insurance services in Nigeria, as in other developing countries. It is a quantitative entry control often used in insurance regulatory regimes as a means of correcting “market imperfections”Footnote 105 in the sector.

In Nigeria, the legal provision for a minimum share capital is based on the nomenclature of the insurance firm; for a life assurance business it is N150m (£566,000), a general insurance business N200m (£755,000), a composite insurance business N350m (£1.4m) and a reinsurance business N350m (£1.4m).Footnote 106 This provision, though amended by new capital requirements of N2bn for life assurance businesses and N10bn for general insurance and reinsurance businesses,Footnote 107 still follows the same categorization of the act except for the fact that composite insurance firms have been abrogated.Footnote 108

Currently, fixed minimum requirements do not provide adequate cushioning against insolvencyFootnote 109 nor answers to all regulatory problems.Footnote 110 Furthermore, minimum capital standards do not cover all the risks of insurance firmsFootnote 111 especially those of large multi-national insurance companies that may come into the domestic insurance market when the market becomes more transparent and efficient. Therefore, most countries applying PBRs operate risk-based capital or risk-based regulation as quantitative controls in place of minimum capital standards.

Risk-based regulation employs an individual risk assessment of insurance firms to identify perceived high risk firms. Thus firms with high market shares are “allocated significant supervisory resources” to avoid the damaging effect of their risk in the market.Footnote 112 Since 1992, the National Association of Insurance Commissioners has increasingly applied risk-based capital to various classes of insurers in the USA.Footnote 113 In the UK, the FCA (which replaced the Financial Services Authority) has the statutory duty to adopt policies that are “proportionate, economically efficient and eligible to preserve competition [and] innovation”.Footnote 114 This framework enables flexibility and allows the FCA to formulate rules and enforce them in a manner that is proportionate to the risks of each regulated firm.Footnote 115 Fixed minimum capital is an obsolete regulatory instrument that is giving way to risk-based solvency and capital regimes.

Non-risk-based regulatory regimes

Risk-based regulations require actions at both the policy and implementation levels.Footnote 116 On the policy level “capital requirements must be linked directly to the firms risks”Footnote 117 and explicit emphasis be placed on the board's responsibility to manage risks, with well documented policies highlighting measures for doing so. This links the management of firms' risk with corporate governance. At the implementation level, prioritizing supervisory activities according to risk and emphasizing preventive measures are germane. Risk-based regulations, apart from risk-based capital noted above, also involve risk-based solvency capital which establishes more meaningful “minimum standards of capital adequacy related to an insurers risk of insolvency”.Footnote 118

Risk-based regulations are prudent provisions demanding that capital requirements are directly linked to a firm's risks. This means that the requirements of premium reserves, solvency and minimum share capital ought not to apply equally to all firms. Each firm must have specific requirements linked directly to its risk portfolio, which is a function of its market share.

NAICOM's solvency regulations encompass all the necessary criteria as defined by international standards such as the IAIS.Footnote 119 They address issues of the valuation of liabilities and assets, including the quality and liquidity of such assets. They define suitable forms of capital and capital adequacy requirements. NAICOM directives also provide practical interpretations for IA provisions on the calculation of admissible and non-admissible assets in NAICOM's annual guidelines. However, none supports risk-based regimes. For example, solvency provisions in the act require all insurers to maintain a solvency margin of 15 per centum of gross premium, less insurance. This means that the minimum solvency margin is “total admissible assets less total liabilities” which “shall not be less than either 15 per centum of net premium on the minimum paid up share capital whichever is higher”.Footnote 120 This rate has no reference to the differences in risk portfolios of insurance firms.

Solvency is a major area of regulation in insurance;Footnote 121 it concerns reports and financial analysis, capital requirements, on-site inspection, reserve regulation and other measures for the early detection of potential insolvency in order to prevent consumers' suffering.Footnote 122 Consequently, the application of a risk-based approach to the IA in the NII is imperative to prevent market insolvencies. While not suggesting the adoption of Solvency 11,Footnote 123 the law should be sufficiently dynamic to ensure that risk-based measures, attuned to the realities of the global financial market, are in place, considering the globalization of financial markets.

Prudential provisions in the IA are performance-based regimes,Footnote 124 implying that they are not sensitive to the size and complexity of the risks written by insurance companies. The act needs to be reformed to apply risk-based regimes in line with current international prudential standards. The solvency regime is inadequate and weak.Footnote 125 This takes into account that 50 per cent of insurance policies culminate in bad debts. Solvency regulations are put in place to ensure that companies meet their long term obligations. A performance-based solvency margin is inadequate to address the predominant issues of bad debts and high lapse rate in the NII.

The lack of risk-based regulations has negative implications for insurance market efficiency. Risk-based regimes allow flexibility in the formulation of rules, certifying that they are commensurate with the risks of individual insurance firms. Risk-based regulations also support regulatory and market efficiency and effectiveness.

CONCLUSION

This article has considered the advantages and models of PBR in relation to insurance and has suggested some areas for reform where these principles could be applied in the NII regulations. The prescriptive regulatory regimes in place in Nigeria are not only obsolete, but also affect regulatory effectiveness and efficiency, resulting in general market inefficiency and other related problems, such as low penetration and unethical practices in the NII. Furthermore, poor regulatory structures have negative implications for the prospect of trade in insurance services which could support economic development in Nigeria. This article therefore suggests the adoption of principles from other jurisdictions and international organizations to alleviate the problems of the NII.

Footnotes

1 C Mayer “Regulatory principles and the Financial Services and Markets Act” (paper prepared for a conference on “The challenges facing financial regulation”, organized by the Centre for Corporate and Commercial Law at the University of Cambridge, 6–7 July 2000) at 5–6.

2 Id at 6.

3 Vaughan, EJ and Vaughan, TFundamentals of Risk and Insurance (10th ed, 2008, Wiley) at 106.

4 Klein, RW “The growing sophistication of solvency policing tools” (2000) 19 Journal of Insurance Regulation 235 at 238. See also Keaton, RInsurance Law: Basic Text (1971, West Publishing) at 2.

5 Mattoo, A and Stern, RM “The framework of trade in services: Overview” in Matto, A, Stern, RM and Zanini, G (eds) A Handbook of International Trade in Services (2008, Oxford University Press) 1.

6 Mayer “Regulatory principles”, above at note 1 at 6.

7 Wouters, J and Coppens, D “GATS and domestic regulation: Balancing the right to regulate and trade liberalization” in Alexander, K and Andenas, M (eds) The World Trade Organisation and Trade in Services (2008, Martinus Nijhoff) 207 at 209.

8 P Lakshmi “Introduction to the trade and development aspects of insurance services and regulatory framework” in Trade and Development Aspects of Insurance Services and Regulatory Framework (UNCTAD/DITC/TNCD/2007/4) 1 at 22, available at: <http://www.unctad.org/en/docs/ditctncd20074_en.pdf> (last accessed 23 April 2011).

9 Lastra, RM “Financial law reform in emerging economies” (2008) 23 Journal of International Banking Law and Regulation 413 at 417–18.

10 Davis, KE and Treblicock, MJ “Legal reforms and development” (2001) 22 Third World Quarterly 21 at 32.

11 Id at 33.

12 Ringer, T “Development, reform, and the rule of law: Some prescriptions for a common understanding of the ‘rule of law’ and its place in development theory and practice” (2007) 10 Yale Human Rights and Development Law Journal 178 at 182.

13 Swiss Re Sigma Research World Insurance in 2009 (2012, Swiss Re Publication) at 33.

14 Id at 31.

15 Id at 38–39. These include the three leading nations in Africa, as well as Kenya, Namibia, Tunisia, Algeria, Mauritius and Angola.

16 J Akintunde “Burning issues in Nigerian insurance industry” (11 August 2010) Financial Nigeria, available at: <http://www.financialnigeria.com/development/developmentreport_category_item_detail.aspx?categoryid=16&item=173> (last accessed 10 August 2011). See also O Ayeleso “Can Nigeria's insurance industry regain international confidence” (22 September 2010) Nigerian Tribune; and Aduloju, SA, Awoponle, AL and Oke, SA “Recapitalization, mergers and acquisitions of the Nigerian insurance industry” (2008) 9 The Journal of Risk Finance 449 at 450.

17 Parasuraman, AZ and Berry, VA “A conceptual model of service quality and its implications for future research” (1995) 49 Journal of Marketing 41 at 47; Omar, OE “The retailing of life insurance in Nigeria: An assessment of consumers' attitudes” (2007) 1 Journal of Retail Marketing Management Research 41 at 46. See also Ayorinde, RO “Insurance-fund investment regulation in Nigeria” (2001) 20 Journal of Insurance Regulation 195 at 201.

18 NAICOM “NAICOM corporate strategic plan 2011–2015”, available at: <http://naicom.gov.ng/payload?id=32a9d8c6-4da1-432d-b6b4-f2306c71b787> (last accessed 16 December 2014).

19 Ayeleso “Can Nigeria's insurance”, above at note 16. See also A Osae-Brown “Insurance: A beleaguered sector and less than penny stocks” (6 June 2011) Businessday.

20 CP Barros and EL Obijiaku “Technical efficiency of Nigerian insurance companies” (Technical University Lisbon working paper WP018/2007/DE/UECE) at 5, available at: <http://pascal.iseg.utl.pt/~depeco/wp/wp182007.pdf> (last accessed 1 August 2011).

21 Ayorinde “Insurance-fund investment”, above at note 17 at 203.

22 This is in line with chap III of the UN Convention Against Corruption adopted by the UN General Assembly in res 58/4 on 31 October 2003.

23 Economic and Financial Crimes Commission Establishment Act of 2004, sec 1.3.

24 Oyetayo, Y “Transparency and accountability in the supervision of the Nigerian insurance industry: A review of statutory provisions” (2012) VIII/2–3Lagos State University Law Journal 57.

25 Hopper, M and Stainsby, J “Principled-based regulation-better regulation” (2006) 21 Journal of International Banking Law and Regulation 387 at 388.

26 J Black “Forms and paradoxes of principles-based regulation” (London School of Economics and Political Science Law Society and Economy working paper 13/2008) at 17.

27 Id at 17–18.

28 Id at 23–24.

29 Id at 35–36.

30 Footnote Ibid.

31 The Financial Services Authority (FSA) “Principles-based regulations: Focusing on outcomes that matter” (2007) at 4, available at: <http://www.fsa.gov.uk/pubs/other/principles.pdf> (last accessed 15 October 2012).

32 Footnote Ibid.

33 HD Skipper and RW Klein “Insurance regulation in the public interest: The path towards solvent, competitive markets” (paper prepared for the Co-Ordinating Committee on International Insurance Issues on Coalition of Service Industries 1999) at 11–12.

34 FSA “Principles-based regulations”, above at note 31 at 6.

35 Footnote Ibid.

36 Black, J, Hopper, M and Band, C “Making a success of principles-based regulations” (2007) Law and Financial Markets Review 191 at 192.

37 Id at 197.

38 GATS “Nigeria schedule of specific commitments” (1994) GATS/SC/65, 5 and “Nigeria schedule of specific commitments supplement 1” (1998) GATS/SC/65/Suppl.1.

39 Nigeria is a member of the IAIS and has already implemented some of its principles, though more needs to be done in this regard.

40 International Association of Insurance Supervisors “Insurance core principles, standards, guidance and assessment methodology”, available at: <http://www.iaisweb.org/Insurance-Core-Principles-material-adopted-in-2011-795> (last accessed 14 December 2014).

41 Id at para 1.

42 Black, Hopper and Band “Making a success”, above at note 36 at 192.

43 Footnote Ibid.

44 Id at 193.

45 Footnote Ibid. See also J Tiner “Principles-based regulation and what it means for insurers” (paper presented at FSA Insurance Sector Conference, London, 20 March 2006).

46 FCA “Principles of business”, available at: <http://fshandbook.info/FS/html/FCA/PRIN/2/1> (last accessed 15 December 2014).

47 FCA “Principles of good regulations”, available at: <http://www.fca.org.uk/about/why-we-do-it/our-remit/principles> ( last assessed 14 December 2014).

48 Nebel, R “Regulations as a source of systemic risk: The need for economic impact analysis” (2004) 29 Geneva Papers on Risk and Insurance 273 at 274.

49 J Marchetti “Developing countries in the WTO services negotiations” (World Trade Organization Economic Research and Statistics Department staff working paper 2004–06) at 5.

50 Yokoi-Arai, M “GATS' prudential carve out in financial services and its relation with prudential regulation” (2008) 57 International and Comparative Law Quarterly 613 at 619.

51 A Kleitz “Experience and best practices in achieving regulatory efficiency and open markets” (paper for Organisation for Economic Co-operation and Development (OECD) regulatory management and reform seminar, 19–20 November 2001) at 3.

52 These are cross-border, consumption abroad, commercial presence and entry of natural persons modes.

53 Lang, A “GATS” in Bethlehem, D et al. (eds) The Oxford Handbook on International Trade Law (2009, Oxford University Press) 157 at 161.

54 Krajewski, M “Service trade liberalization and regulation: New developments and old problems” in Herrmann, C and Terhechte, JP (eds) European Yearbook of International Economic Law (2010, Springer-Verlag) 153 at 160.

55 The service may be bought in a particular jurisdiction but some of the benefits are available in jurisdictions where the service provider is not resident, such as in cases of emergency airlifting a consumer from their country of residence to the country of the service provider.

56 The Nigerian Enterprises Promotion Decree of 1972 set out to make Nigeria economically independent but has been criticized as having sacrificed economic efficiency in the drive to replace foreign nationals with Nigerians: Ogbuagu, CSA “The Nigerian indigenisation policy: Nationalism or pragmatism?” (1983) 82 African Affairs 241.

57 This involves buying an insurance health service from foreign jurisdictions where parts of the benefits under the health care plan involve emergency airlifting of the consumer from Nigeria to the country of the service provider.

58 Cottier, T and Krajewski, M “What role for non-discrimination and prudential standards in international finance law” (2010) 13 Journal of International Economic Law 817 at 827.

59 GATS, art VI(1).

60 Krajewski, M “Article VI GATS domestic regulation” in Wolfrum, R, Stoll, P and Feinäugle, C (eds) Max Planck Commentaries on World Trade Law WTO-Trade in Services vol 6 (2008, Martinus Nijhoff Publishers) 170 at 171.

61 Krajewski, MNational Regulation and Trade Liberalization in Services: The Legal Impact of General Agreement on Trade in Service (GATS) on National Regulatory Autonomy (2003, Kluwer) at 34.

62 Id at 33.

63 Krajewski “Article VI GATS”, above at note 60 at 171.

64 Delimatsis, P “Due process and ‘good’ regulation embedded in the GATS: Disciplining regulatory behaviour in services through article VI of the GATS” ( 2007) 10 Journal of International Economic Law 13 at 26.

65 F Ortino “From ‘non-discrimination’ to ‘reasonableness’: A paradigm shift in international economic law?” (European Union Jean Monnet Programme working paper no 01/05) at 33, available at: <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=922524> (last accessed 18 April 2011).

66 Iida, K and Nielson, J “Transparency in domestic regulations: Practices and possibilities” in Mattoo, A and Sauvé, P (eds) Domestic Regulation and Service Trade Liberalization (2003, World Bank and Oxford University Press) 7 at 17.

67 GATS, arts VI, XVI and XVIII.

68 Kleitz “Experience and best practices”, above at note 51 at 3.

69 Such as the Companies and Allied Matters Act of 2004, Nigerian Investment Promotion Commission Act of 2004, Immigration Act, cap 71 of 1990, Securities and Exchange Commission Acts of 1988, 1999 and 2007, and the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act of 2004.

70 The winding up petition is generally governed by company law in Nigeria but the IA gives rights to policyholders.

71 IA, sec 32. With the approval of NAICOM, a petition to wind up an insurance company may be presented to the court by 50 policyholders who have held policies with the company for at least three years. Though derived under the IA, policyholders' rights can only be enforced in compliance with the winding-up provisions of secs 408 and 409 of the Companies and Allied Matters Act of 2004, which include that the company is unable to pay its debts or it is equitable that the company be wound up.

72 Id, sec 33. However, non-life companies can wind up voluntarily under the company law regime.

73 Code of Good Corporate Governance for Insurance Industry in Nigeria of 2009, sec 4.

74 IA, sec 79.

75 IAIS “Insurance core principles”, above at note 40, Principles 9 and 10.

76 NAICOM “Know your customer guideline”, available at: <http://naicom.gov.ng/content?id=29> (last accessed 15 December 2014).

77 IAIS “Insurance core principles”, above at note 40, Principles 27 and 28.

78 Money Laundering (Prohibition) Act of 2004, sec 3.

79 NAICOM “Operational guidelines 2011 (insurers and reinsurers)”, sec 6 (“Adoption of IFRS”), available at: <http://naicom.gov.ng/content?id=28> (last accessed 14 December 2014).

80 The competition emphasizing approach which reflects minimal intrusion (such as in Chile and United States); the restrictive approach with emphasis on partial or complete sheltering of private insurers (as was found in the EU, Korea and Japan but is now only found in developing countries); and the government action approach, delegating the provision of insurance entirely to government (formerly practised by China and India): Skipper and Klein “Insurance regulation”, above at note 33 at 16.

81 Nebel, R “Regulations as a source of systemic risk: The need for economic impact analysis” (2004) 29 The Geneva Papers on Risk and Insurance 273 at 276.

82 In other words, borrowing from the FSA (now FCA) business principles.

83 May, PJ “Regulatory regimes and accountability” (2007) 1 Regulation and Governance 8 at 9.

84 Id at 10.

85 See Oxford English Dictionary online, available at: <http://oxforddictionaries.com/definition/english/transparent?q=Transparent> (last accessed 1 July 2012).

86 Delimatsis, PInternational Trade In Services and Domestic Regulations: Necessity, Transparency and Regulatory Diversity (2007, Oxford University Press) at 255.

87 OECD “Reviews of regulatory reform regulatory policies in OECD countries from interventionism to regulatory governance” (2002) at 65.

88 IA, secs 26(4) and 27(6).

89 Osae-Brown “Insurance”, above at note 19.

90 NAICOM “Operational guidelines”, above at note 79.

91 Oyetayo “Transparency and accountability”, above at note 24 at 57.

92 S Djankov et al “Transparency and accountability” (2008) Harvard University Seminar in Law, Economics and Organisation no 8, available at: <http://www.edhec-risk.com/edhec_publications/all_publications/RISKReview.2008-07-01.0355/attachments/EDHEC%20Working%20Paper%20Transparency%20and%20accountability.pdf> (last accessed 20 July 2011).

93 Locke, JSecond Treatise of Government, An Essay Concerning the True Origin, Extent, and End of Civil Government (1690, Awnsham Churchill by Amen-Corner) secs 164–65.

94 C Secondat, Baron de Montesquieu The Spirit of Laws (1756, Barrillot).

95 La Porta, R, Lopez-de-Silanes, F, Shleifer, A and Vishny, RW “The quality of government” (1999) 15 Journal of Law, Economics and Organization 222.

96 Olken, BA “Monitoring corruption: Evidence from a field experiment in Indonesia” (2007) 115 Journal of Political Economy 200.

97 M Bjorkman and J Svensson “Power to the people: Evidence from a randomized field experiment of a community-based monitoring project in Uganda” (2007, World Bank policy research working paper no 4268), available at: <http://ssrn.com/abstract=996174> (last accessed 20 July 2012).

98 Ferraz, C and Finan, F “Exposing corrupt politicians: The effects of Brazil's publicly released audits on electoral outcomes” (2008) Quarterly Journal of Economics 703 at 703; see also E Hüpkes, M Quintyn and MW Taylor “The accountability of financial sector supervisors: Principles and practice” (IMF working paper WP/05/51) at 6.

99 Djankov et al “Transparency and accountability”, above at note 92.

100 IAIS “Insurance core principles”, above at note 40, Principle 4.

101 Id at 12.

102 Footnote Ibid.

103 Footnote Ibid.

104 Id at 13.

105 Vaughan, TM “Financial stability and insurance supervision: The future of prudential supervision” (2004) 29 The Geneva Papers on Risk and Insurance 258 at 267.

106 IA, sec 9(1)(a). Sterling figure quoted at the rate of N250 to £1.

107 Federal Directive on Insurance Companies Capitalisation of 2005.

108 This means a firm cannot write both life and general businesses.

109 Klein “The growing sophistication”, above at note 4 at 241.

110 Vaughan “Financial stability” above at note 105 at 267.

111 Footnote Ibid.

112 Russell, PO and Dewing, IP “Towards the integrated prudential supervision of UK insurance: Further implications for the role of actuaries and auditors” (2004) 22 Journal of Insurance Regulation 2 at 6.

113 Klein “The growing sophistication”, above at note 4 at 241.

114 Georgosouli, A “The nature of FSA policy rules: A critical overview” (2008) 28 Legal Studies 119 at 127–28.

115 Id at 128.

116 Carmichael, J and Pomerleano, MDevelopment and Regulation of Non-Bank Financial Institutions (2002 ,World Bank Publications).

117 Id at 28.

118 M Grac and SE Harrington “Risk-based capital and solvency screening in property liability insurance: Hypotheses and empirical tests” (Center for Risk Management and Insurance Research), available at: <http://rmictr.gsu.edu/papers/RBCFASTm.pdf> (last accessed 18 March 2011).

119 IAIS “Insurance core principles”, above at note 40, Principle 23.

120 NAICOM Operational Guidelines (Insurance and Reinsurance Companies) of 2010, sec 3.7.

121 Vaughan and Vaughan Fundamentals of Risk and Insurance, above at note 3 at 106.

122 Footnote Ibid.

123 This is the risk-based solvency regime proposed by the EU.

124 These are solvency regimes that are based on net premiums of insurance and reinsurance companies, calculated as gross premium less reinsurance payments.

125 Y Soladoye “Insurance sector presentation” (presentation to international conference on financial system strategy 2020, Abuja, June 2007), slide 46, available at: <http://www.cenbank.org/fss/tue/bsp/insurance/fss%202020%20-%20insurance%20presentation.pdf> (last accessed 31 May 2010).

Ibid
Ibid
Ibid
Ibid
Ibid
Ibid
Ibid
Ibid
Ibid