No CrossRef data available.
We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
Published online by Cambridge University Press: 19 March 2015
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.
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 106Google Scholar.
4 Klein, RW “The growing sophistication of solvency policing tools” (2000) 19 Journal of Insurance Regulation 235 at 238Google Scholar. See also Keaton, RInsurance Law: Basic Text (1971, West Publishing) at 2Google Scholar.
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) 1Google Scholar.
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) 207Google Scholar 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 413Google Scholar at 417–18.
10 Davis, KE and Treblicock, MJ “Legal reforms and development” (2001) 22 Third World Quarterly 21CrossRefGoogle Scholar 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 178Google Scholar at 182.
13 Swiss Re Sigma Research World Insurance in 2009 (2012, Swiss Re Publication) at 33Google Scholar.
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 449CrossRefGoogle Scholar 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 41CrossRefGoogle Scholar at 47; Omar, OE “The retailing of life insurance in Nigeria: An assessment of consumers' attitudes” (2007) 1 Journal of Retail Marketing Management Research 41Google Scholar at 46. See also Ayorinde, RO “Insurance-fund investment regulation in Nigeria” (2001) 20 Journal of Insurance Regulation 195 at 201Google Scholar.
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 57Google Scholar.
25 Hopper, M and Stainsby, J “Principled-based regulation-better regulation” (2006) 21 Journal of International Banking Law and Regulation 387Google Scholar 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 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 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 Ibid.
36 Black, J, Hopper, M and Band, C “Making a success of principles-based regulations” (2007) Law and Financial Markets Review 191CrossRefGoogle Scholar 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 Ibid.
44 Id at 193.
45 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 274CrossRefGoogle Scholar.
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 619CrossRefGoogle Scholar.
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)Google Scholar 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)Google Scholar 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 241CrossRefGoogle Scholar.
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 817CrossRefGoogle Scholar 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)Google Scholar 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)Google Scholar 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 13CrossRefGoogle Scholar 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)Google Scholar 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 273CrossRefGoogle Scholar 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 8CrossRefGoogle Scholar 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)CrossRefGoogle Scholar 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)Google Scholar 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 222CrossRefGoogle Scholar.
96 Olken, BA “Monitoring corruption: Evidence from a field experiment in Indonesia” (2007) 115 Journal of Political Economy 200CrossRefGoogle Scholar.
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 703CrossRefGoogle Scholar 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 Ibid.
103 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 258CrossRefGoogle Scholar 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 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 2Google Scholar 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 119CrossRefGoogle Scholar at 127–28.
115 Id at 128.
116 Carmichael, J and Pomerleano, MDevelopment and Regulation of Non-Bank Financial Institutions (2002 ,World Bank Publications)CrossRefGoogle Scholar.
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 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).