2008insuranceguidelines

To: Commissioner for Insurance,
file:///C|/workfolder/Guidelines%202008(REVISED)2-web2.htm (1 of 18)29/02/2008 13:40:10
NATIONAL INSURANCE COMMISSION, ABUJA
NAICOM RELEASES 2008 POLICY GUIDELINES FOR THE INSURANCE
INDUSTRY
Introduction:
The Insurance Industry, like others within the financial system, has experienced a lot
of changes in its structure and operations, in response to the dynamics of the
economic environment. These changes have triggered a review of related guidelines
in consonance with existing insurance laws and geared towards strengthening the
operational standards of the Insurance Industry.
It is also intended that the guidelines will bring about improved transparency and
accountability in industrial operations.
To this end, the National Insurance Commission, by the powers conferred on it by
the provisions of section 49 (1) of National Insurance Commission Act 1997, has
issued Policy Guidelines which shall form part of the Regulatory and Supervisory
tools for the year 2008.
Highlights of the Guidelines include:
Filing of Annual Returns and Accounts:
The Guidelines require that all insurance and re-insurance companies
submit to the Commission three copies each of their Audited Financial
Statements and Annual Returns. This will be done in prescribed forms, in
respect of the operations of the Company on or before 30th June of the year
following year of operation (i.e. the 2007 Returns to be filed on or before 30th
June 2008).
According to the Guidelines, late filing of annual returns will attract a fine of
N5000.00 per day for each day of default and failure to file Annual Returns is a
ground for cancellation of operating licence.

INSURANCE BROKERS
1.21 All Insurance Brokers in compliance with section 42 (3) of the Insurance
Act 2003 shall file an audited statement of accounts comprising revenue, profit
& loss and balance sheet with the Commission not later than six (6) months
after the accounting date.
1.22 The filing must be in accordance with the prescribed forms in the
Insurance Regulation 2003.
1.23 Late filing of annual returns shall attract a fine of N5000 per day for each
day of default.
1.3 Accounting Period:
For purposes of compliance with 1.1 above, accounting period shall run from
1st January to 31st December of each year in accordance with the Forms
prescribed in the Insurance Regulations 2003.
1.4 Filing Fee:
Each company shall pay the following filing fees as appropriate along with the
submission of Annual Returns and Audited Financial Statements:-
Ø Insurers Composite N150,000
Life or General N100,000
Ø Reinsurers N200,000
Ø Insurance Brokers N50,000
2.0 Determination of Solvency Margin and its Computation:
For the purpose of determining the Solvency Margin status of any company, the
paid up capital as contained in Section 24 Subsection 2 of the Insurance Act 2003,
shall mean the minimum capital base defined as follows: a. Paid up Share Capital
b. Statutory Reserves
c. Share Premium
d. General Reserves
e. Bonus Issue Reserves
Less: - Goodwill
- Other intangible assets and fictitious assets

- Under provisions as per audited accounts
For the purpose of calculating the solvency status of Insurance and Re-
insurance companies the following shall continue to apply:
2.1 Asset: Admissible assets shall include.
2.1.1 Office Equipment Computer Equipment
Plant & Machinery
Capital Work In Progress
Machines and Equipment
Furniture & Fittings
2.1.2 Motor Vehicles - All items of Motor Vehicles.
2.1.3 Land & Building:
a. Land and building not recognized as investment properties except
so constructed.
b. Improvement to leasehold properties.
These shall however be subject to paragraph 2.1.7 of this Guideline.
In addition and in all cases satisfactory evidence of ownership must be
provided.
2.1.4 Investments:
a. Statutory Deposits
b. Real Estate (i.e. Investment Properties)
c. Mortgage Loans
d. Federal and State Government Securities
e. Quoted Stocks and Shares at Market Value or cost
f. Unquoted stocks and Shares at cost
g. Other Stocks and Bonds at cost
h. Cash in Hand
i. Cash on Deposit
j. Commercial loans, including loans to subsidiary subject to section
5 (1) of this guideline.

k. Other Investments.
2.1.5 Other Assets:
a. Staff Loans and Advances (Staff debts but excluding loans to
Directors except as provided in the conditions of services).
b. Deposits for purchase of shares / stocks other than own shares
c. Deposits for purchase of Assets (evidence of deposit to be
supplied)
d. Claims recoverable from Re-insurers. Copies of duly executed
debit notes shall be required as evidence of claims receivable.
2.1.6 In the case of Re-insurers in the year 2008, all outstanding premium due
from insurances and relating to the reporting year shall continue to be
recognized as admissible assets. This is in due recognition of the long tail
nature of reinsurance business.
2.1.7 Investments in real property over and above the statutory limit i.e more
than 35% of total assets and all encumbered assets shall no longer be
recognised for purposes of solvency determination.
2.2 Liabilities: These shall include:
2.2.1 Insurance Funds
a. Reserves for Un-expired risk
b. Reserves for outstanding claims
c. Reserves for claims incurred but not reported
2.2.2 Other Liabilities:
a. Amounts owed and / or accrued for settlement of debts owed third
parties (i.e. including insurers, re-insurers and insurance agents but
excluding proposed and deposit for shares by shareholders and other
shareholders funds).
b. Provisions for taxation.
c. Sundry liabilities.
2.3 Net Premium Income shall be defined as “Gross premium income less re-

insurance during the year under review”.
2.4 Margin of solvency shall be defined as “total admissible assets less total
liabilities”. This shall not be less than either 15% of net premium or the
minimum paid up share capital whichever is higher.
3.0 Revaluation of Fixed Assets:
3.1 Without prejudice to the provisions of Companies and Allied Matters
Act, reserves arising from revaluation of Fixed Assets of Insurance and
Reinsurance Companies shall not be recognized as part of the assets of that
company except if it has been approved by the Commission and has been
incorporated in the books for not less than 3 (three) years thereafter.
3.2 For the purpose of solvency determination, the Commission shall not
recognize the surplus on re-valued assets in Annual Returns and Financial
Statements prepared without due cognisance to 3.1 above.
4.0 Valuation of Shares, Stocks and Bonds:
4.1 Shares and stocks held by Insurance and Reinsurance Companies shall be
valued as follows:
i. Quoted shares shall be at market value,
ii. Unquoted and other shares and stocks shall be valued at cost.
5.0 Investment :
In due consideration of the importance of investment to the overall
performance of Insurance & Reinsurance Companies, the following shall guide
their operations in the year 2008.
5.1 Investment in any single subsidiary or related company shall not be more

than 25% of the total admissible assets except in Insurance and Reinsurance
institutions.
5. 2 All off-shore investments must be disclosed to the Commission along
with the annual returns as contained in Form G 1.
5.3 No insurer shall have more than 20% of its total funds domiciled in any
one bank. Total funds shall mean all Cash Investments, Current Account
Balances and Deposits.
5.4 In addition, not more than 25% of a company’s total asset shall be
allowed as investment in unquoted companies.
5.5 In accordance with section 26 (1) (c) of Insurance Act 2003 a detailed
statement of investments representing the insurance funds shall be filed with
the Commission as part of the Annual Returns.
6.0 Creditors
All outstanding claims for which liabilities have been accepted and those for which
Discharged Vouchers have been issued shall be fully paid on or before 30 days after
discharge vouchers have been signed and returned by claimant.
6.1 Age Analysis of Outstanding Claims:
a. Insurance and Re-insurance companies shall disclose in their
audited annual returns to the Commission the sum outstanding as
unsettled claims as at the end of the year according to age analysis as
follows:-
i. 0 – 90 days
ii. 91 – 180 days
iii. 181 – 270 days
iv. 271 – 360 days
v. 361 – days and above.

b. Form G2 © of this guideline shall be the acceptable presentation
format.
7.0 Trade Debtors
7.1 a. Age Analysis of Outstanding Trade Debtors:
Insurance and Re-insurance companies shall disclose in their audited
annual returns to the Commission the sum outstanding as trade debtors as
at the end of the year according to age analysis as follows:-
i. 0 – 90 days
ii. 91 – 180 days
iii. 181 – 270 days
iv. 271 – 360 days
v. 361 – days and above.
b. Also to be disclosed is the details of brokers whose indebtedness is
not less than N500,000 as at the end of the period of report.
c. Form G2 (P) of this guideline shall be the acceptable presentation
format.
7.2 Provisions:
The following mandatory minimum provisions for bad debts shall be made in
respect of trade debtors:
Up to 3 Months – Nil
3 – 6 Months – 25%
6 – 9 Months – 50 %
9 – 12 Months – 75%
Above 1 Year – 100%
8.0 Approval of Annual Accounts:
8.1 Insurance and Re-insurance companies shall continue to obtain approval
of their Annual Returns and Financial Statements from the Commission before
distribution of dividends to shareholders. This calls for early submission of
returns at least 30 days before proposed date of notification for the Annual
General Meeting.

8.2 Insurance and Reinsurance companies shall instruct their external
auditors to forward copies of domestic reports directly to the commission. In
addition, companies may be required to submit details of subsequent actions
taken to correct errors / observations identified.
8.3 Insurance and Re-insurance companies shall not publish
their financial statements in any
National Newspaper except as stipulated in sections 26 (4) & 27 (6) of the
Insurance Act 2003 and compliance with 7.1 above.
8.4 Insurance and Reinsurance companies must henceforth obtain prior
approval of their annual returns/financial statement of accounts from the
commission before consideration by the shareholders at the Annual General
Meeting.
8.5 Failure to obtain prior approval as in 8.1 to 8.4 above shall attract
appropriate sanction.
8.6 In compliance with S. 20 (1) (a) of the Insurance Act 2003 a class-by-
class Schedule of Unexpired Risks for general business presented in the format
of Form G3 shall form part of an insurer’s annual returns. The presentation for
each class shall be month-by-month in order of commencement dates.
9. Quarterly Returns:
All Insurance and Reinsurance companies shall within thirty (30) days from
the end of each quarter file un-audited returns of their operations as at the end
of the quarter with the Commission as follows:
a. Insurers & Re-insurers (General Business)
i. Statement of premium transaction by class of business (in line
with form 11a items 1 – 10)
ii. Statement of Commission by class of business (in line with
form 11b items 1 – 5)
iii. Statement of claims by class of business (in line with form

11c items 1 – 5: 9-10)
iv. Statement of management expenses (in line with form 11d)
v. Quarterly balance sheet (in line with form 9)
vi. Profit & Loss Account.
b. Insurers and Re-insurers: (Life)
i. Quarterly Revenue account (in line with form 12)
ii. Quarterly balance sheet (in line with form 8)
iii. Quarterly Statement of claims (in line with form 12a).
iv. Quarterly Statement of policy exhibit stating only:- Number
of Policies
Sums Assured
Related Annual Premium
v. Quarterly Statement of Insured Pension business including
deposit administration stating:-
Type of Pension business
Number of policies / contracts
Total premium/contribution.
vi. Profit & Loss Account.
c. Insurance Brokers:
Statement of business generated in the quarter stating:-
Ø Gross premium (Local & foreign)
Ø Premium collected
Ø Premium Remitted
Ø Balance in Remittance Account
Ø Outstanding premium
Ø Commission earned,
Ø Client Account.
d. Loss Adjuster:
Statements of claims adjusted in the quarter stating:-
Ø Nature of claim
Ø Name of Insurer
Ø Amount of claim

Ø Total fee
10.0 Personnel Returns:
All insurers, Reinsurers, Broking and Loss Adjusting firms shall each file with
the Commission the personnel status of its establishments as at the end of each
quarter in line with the following format:
a.
Category Male Female Total
Executive Directors
Management(Manager &
above
Senior Staff
Junior Staff
b. Changes during the quarter
Executive
Directors
Management Senior
Staff
Junior
Staff
Additions
Withdrawals
10.1 Every staff of an insurance institution, including Executive Directors,
must be full time employees on the company’s pay roll.
11.0 Penalties
11.1 Late filing of quarterly returns shall attract a fine of N5000 per day for
each day of default.
11.2 Failure to render quarterly returns shall attract fine of N500,000 for each
quarter of default.
11.3 Failure/Refusal to render quarterly returns is an indication of distress and
a ground for suspension of the company from transacting business.
12.0 Contraventions
All contraventions on which penalties have been imposed in any accounting year
must be disclosed in the Annual Accounts to be presented at the AGM.

13.0 Fraud & Related Malpractices:
Without prejudice to Section 18 of this Guideline, all insurers, re-insurers,
broking and loss adjusting firms shall each file with the Commission on
quarterly basis, details of financial malpractices established against its staff,
clients or any other persons. The details shall include the following.
a. Identity of perpetrator (i.e. name, age, sex, etc)
b. Nature of malpractice
c. Amount involved
d. Penalty
e. Efforts made to avoid reoccurrence
14.0 Rates and Rebates:
As a means of stemming the increasing tide of unexplained rebates and rates
discounts, it shall be illegal for any insurance institution to grant any rates in
the transaction of insurance business except as duly stipulated by law or
generally agreed by the industry and acceptable in practice and to the
Commission.
15.0 Re-insurance Treaties and Retrocession Arrangements:
As required by the enabling laws, all reinsurance and retrocession
arrangements must be concluded and a copy filed with the National Insurance
Commission on or before 31st December of the preceding year (i.e. 2008
arrangement must be filed before 15, January 2008).
16.0 Details of Foreign Reinsurers:
In the year 2008, Insurance and Reinsurance companies dealing with foreign
reinsurers and retrocessionaires shall file with the Commission details of such
foreign operators indicating their;
Ø Names
Ø Addresses
Ø Telephone Number
Ø E-mail address
Ø Website

Ø Any other relevant information
17.0 Insurance Levy Returns:
All insurance institutions as defined in NAICOM Act 1997 shall not later than
31st of March 2008 file with the Commission a duly completed assessment
forms 1A, 1B, 1C & 1D of Insurance Regulations 2003 as applicable for the
purpose of insurance levy assessment. All assessments made pursuant to the
above paragraph or variations there from must be fully settled on or before 30th
September, 2008.
17.1 Every sum payable by any Insurance and Reinsurance company, Broker
and Loss Adjuster by way of Insurance levy that remained unpaid after 30th
September of the year of assessment shall attract additional sum at the rate of 2
½% above the Central Bank of Nigeria minimum rediscount rate (MRR).
18.0 Actuarial Department
18.1 Every Life Office is required to establish an Actuarial department manned by
a knowledgeable person in actuarial matters.
19.0 Product Development and Approval
19.1 All insurance companies are encouraged to establish Research and Business
Development Department for its operation.
19.2 With effect from 1st January, 2008, Approval of any product by the NAICOM
shall attract a fee of N50.000.00.
20.0 Distribution channel
20.1 Every insurance company is encouraged to establish at least a branch office in
each of the geo-political zones of the federation for effective service delivery.
20.2 Approval must be obtained before the establishment of any branch offices
including off-shore branches.
21.0 Heads of Departments
21.1 The number of departments to be maintained by all insurers shall, among
other requisite departments required by Law and/or Insurance Regulations, include
Audit, Actuarial (in case of life office) and Information Technology.

21.2 In all cases, the Heads of departments must be professionally qualified
persons in their relevant fields.
22.0 Audit
22.1 The tenure of an appointed External Auditor in an insurance company shall be
for a maximum of 5 years.
22.2 There shall be established, an Internal Audit Unit in every Insurance
Company to be headed by a professionally qualified Accountant not below the rank
of AGM or its equivalent.
22.3 The Internal Audit report of an insurance company shall be filed with the
Commission every quarter.
23.0 Corporate Governance:
23.1 The Commission stresses high standard of corporate
governance within the insurance sector. Consequently, more
responsibilities are now on members of the Boards of Directors to ensure
sound business practice and effective compliance with all statutory
requirements including the corporate governance guideline issued by the
commission.
24.0 NAICOM Relationship Officers (NROs)
To further strengthen the relationship with the regulatory authority all
insurance, reinsurance companies and broking firm are required to appoint a
sufficiently senior member of staff as NRO whose duties shall include:
• Vetting of all returns to the Commission
• Ensure compliance with all statutory requirements.
• Ensure effective dissemination of directives and policy changes as
may be contained in administrative letters, circulars, guidelines and other
relevant statutory documents issued by the Commission from time to
time.
The NRO who shall report directly to the Chief Executive Officer,
observations or conducts which are inconsistent with the statutory provisions
and/or standard practice shall be at liberty to report to the Commission any

observation. The NRO shall file quarterly report of its activities to the
Commission.
25.0 Compliance with Anti-Money Laundering/Combating Financing
Terrorism Activities Laws:
25.1 Display of Provisions of Money Laundering Act
All companies shall display visibly in all their operation centres
nationwide the provisions of the Money Laundering (Prohibition) Act 2004
regarding their duty to file Cash Transaction Reports (CTRs) and Suspicious
Transaction Reports (STRs) with the Nigerians Financial Intelligence Unit
(NFIU) and forward copies to the National Insurance Commission (NAICOM).
25.2 Customer Identification:
In recognition of Life Assurance and other investment related insurances as
financial activities under the Money Laundering (Prohibition) Act 2004, it is
mandatory for all insurance institutions to identify their customer and their
customer’s businesses before entering into or establishing any business
relationship with the customer.
Customer identification shall be in compliance with the provisions of the
Know Your Customers Guidelines (KYCG) issued by the National Insurance
Commission and other guidelines/regulations which may be issued by the
Economic and Financial Crimes Commission (EFCC) from time to time.
25.3 Cash Transaction Reports (CTR)
All insurance institutions shall report to the Nigerian Financial Intelligence
Unit (NFIU) within 7 (seven) days any single cash transaction, lodgements or
transfer of funds in excess of:
a. N1,000,000 or its equivalent in the case of an individual or
b. N5,000,000 or its equivalent in the case of a corporate body.
The report shall include the following:

Ø Name and addresses of the customer
Ø The nature of transaction
Ø The amount involved etc.
Failure to file CTR will attract a penalty of N500,000.00 in each case
25.4 Suspicious Transactions Report (STR)
All suspicious transactions, the amount involved notwithstanding, shall be
filed with the NFIU within 7 (seven) days of such transaction. Details to be
provided shall include the following:
Ø Name of Customer
Ø Address of Customer
Ø Nature of Transaction
Ø Source of Fund
Ø Nature of Customer’s Business
Ø Amount Involved.
Failure to file STR will attract a penalty of N1,000,000.00 in each case.
25.5 Appointment of Compliance Officer.
All Insurance, Reinsurance Companies and Broking firms shall appoint a
compliance officer not below the rank of an Assistant General Manager who
shall be responsible for monitoring, compliance and all anti-money laundering
laws, regulations and guidelines. The details of the appointed Compliance
Officer and any changes thereof shall be filed with the Commission.
Annual report of activities of the Compliance Officer shall be filed with the
Commission not later than 31st January following the year of report.
25.6 Training
Each company shall organise regular in-house training on
AML/CFT in line with the provisions of section 9 (1b) of the
Money Laundering (Prohibition) Act 2004.
Failure to comply will attract a penalty of N1, 000,000.00

25.7 The relevant provisions of the Money Laundering (Prohibition) Act 2004
and the Economic and Financial Crime Commission (Establishment) Act 2004
shall apply.
26.0 Off-Shore Branch Operation:
Any insurance institution operating or intending to operate an off-shore
branch and/or subsidiary shall seek and obtain approval from the Commission
to commence or continue business.
Quarterly and annual returns on the operations of such branches and/or
subsidiaries shall be filed with the Commission in line with articles 7& 10
above.
27.0 Changes in Ownership/Directorship:
All changes in ownership of all insurance institutions that will entitle any
individual to control (directly or indirectly) up to 25% holding of any
Insurance, Reinsurance, Broking or Loss Adjusting firm must be cleared with
the Commission before such transaction are concluded.
28.0 Miscellaneous Provisions
28.1 For the purpose of section 72 sub-section 2(f) of the Insurance Act 2003,
the Commission hereby prescribes the following as “domestic insurance or
reinsurance” business:
* Oil and Energy Insurance and reinsurance business;
* Marine Hull insurance and reinsurance business; and
* Aviation insurance and reinsurance business;
* Any other business that the Commission may so prescribe from
time to time.
28.2 All insurable risks associated with Oil and Gas business including
prospecting, exploration, drilling, construction, shipping, distribution,
marketing, transportation, etc shall be placed 100% through an insurer in the
Nigerian Insurance Industry duly registered under the Insurance Act 2003.

The insurer would place part of the risks first with other domestic insurers and
reinsurers to their maximum capacities before placing the balance in the
international market through an internationally established re-insurance
arrangement. This shall however be subject to obtaining a formal attestation
letter to that effect from the National Insurance Commission.
In conclusion, it is the belief of the National Insurance Commission that all
stakeholders in the Insurance Industry will continue to work together in the interest
of our industry so that we can make the year 2008 a much more successful one.
COMMISSIONER FOR INSURANCE
FORM G 1
S/No. Type of Investment Amount Location Tenure Annual Return on
Investment
FORM G2 (C)
AGE ANALYSIS OF OUTSTANDING CLAIMS
OUTSTANDING
CLAIMS PER
TOTAL OUTSTANDING CLAIMS

CLAIMANT 0 - 90
DAYS
91 - 180
DAYS
181 - 270
DAYS
271 – 360
DAYS
361 DAYS + TOTAL
1 – 250,000
250,001 – 500,000
500,001 – 1,500,000
1,500,001 – 2,500,000
2,500,001 – 5,000,000
5,000,001 – ABOVE
GRAND TOTAL
FORM G2 (P)
AGE ANALYSIS OF OUTSTANDING PREMIUM
OUTSTANDING
PREMIUM PER
CLAIMANT
TOTAL OUTSTANDING PREMIUM
0 - 90
DAYS
91 - 180
DAYS
181 - 270
DAYS
271 – 360
DAYS
361 DAYS + TOTAL
100,001 – 500,000
500,001 – 1,500,000
1,500,001 – 5,000,000
5,000,001 – 10,000,000
10,000,001 – 25,000,000
25,000,001 - ABOVE
GRAND TOTAL

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