The National Insurance Commission (NAICOM) has said the major regulatory bodies in the Nigeria’s finance sector were considering amalgamating the Corporate Governance codes existing in the respective sub-sectors in the industry.
According to the commission, this process would be followed by the making of relevant laws to make compliance with the consolidated codes mandatory for boards and management of companies operating within the sector.
The Commissioner for Insurance, Mr. Fola Daniel, stated this while fielding questions from newsmen after the meeting of the newly-inaugurated Governing Board of NAICOM in Lagos recently.
Codes of Good Corporate Governance for the insurance industry currently cover structures, practices and procedures put in place by the board and persons duly appointed by the owners to direct and manage the business of the company. It is also expected to ensure transparency, accountability and enhanced shareholders value.
According to him, implementation of corporate governance is the business of Board of Directors of companies even as they are said to be advisory and not mandatory for now.
He also confirmed that the major regulators in the finance sector including the Central Bank of Nigeria (CBN), Securities and Exchange Commission (SEC) and the NAICOM were trying to harmonise the codes they issued for operators under their supervision respectively.
After amalgamating these codes, the regulators are likely to give the document a legislative back up to make compliance with the codes compulsory and make it possible for the law to be enforced, he added.
“Corporate governance as advisory, I think, will soon become a thing of the past. There is an attempt to amalgamate all the codes as set by the pioneers of corporate governance. SEC is the pioneer of corporate governance even before the banks. The Central Bank followed suit and we were the last comer. I am happy that we did it when we did because if we didn’t pass our corporate governance codes then we would have been the old man out.
“So there is an attempt to amalgamate it and give it some legal backing as we have in the United Kingdom. In the United States of America it is comply or explain but American society is advanced. People will naturally even want to comply in order to advance their business interests but here we are trying to give it a bit of legislative push,” Daniel said.
He also explained why the insurance regulator is not in a hurry to enforce some aspects of the codes, particularly, restricting the number of years a Director can sit on the board of a company saying there was no need for that since the industry is not in crisis.
“The press wants us to mimic the banking sector. The banking sector has different problems. Normally, change of board members is the prerogative of shareholders. There was crisis in the banks that made that to happen but we don’t have the same situation in the insurance sector,” the insurance commissioner stressed.
Launched by NAICOM in 2009, the Code of Good Corporate Governance for the Insurance Industry in Nigeria refers to the manner in which companies are directed and controlled.
It also encompasses the means by which the board and management are held accountable and responsible for their actions and includes corporate discipline, transparency, independence, accountability, responsibility, fairness and social responsibility.
These rules increases competitiveness and makes criminal activities more difficult and helps to provide a degree of confidence that is necessary for the proper functioning of a market economy and economic growth, the insurance regulator stated.
Before now, the commission said the “Nigerian insurance industry shall operate on a good corporate governance framework which promotes transparent and efficient markets, and clearly articulates the division of responsibilities among different stakeholders in the industry.”
Meanwhile some of the major recommendations of the codes are still being flouted by some operators in the industry with the commission, particularly in the area of composition of Boards of Directors, appointment of Chairman and Chief Executive Officer.
Section 5.04 (x & xi) of the code for insurers states that: “The Chief Executive Officer of the company shall be the person approved by the commission and shall be a member of the board throughout his/her tenure. Any individual taking major action in the running of the company must either be a member of the board, the management or paid consultant.
This particular code is further given teeth by the appointment of approved person’s provisions in various insurance laws which require that Chief Executives of companies, Executive Directors and Head of Departments must be qualified insurance professionals with various years of experience in insurance practice.