Mr. Muhammadu Bagudu Hussaini, is the Managing Director and Chief Executive Officer (CEO) of NICON Insurance Limited. In this interview, he said losses arising from the recent EndSARS protest can be compensated and that claims paid by insurance companies can be refunded by the Federal Government.
Some of the property destroyed during the EndSARS protest were insured, how would this affect claims payment?
There will be a large volume of claims which the insurance industry would have to pay. I have no doubt about the capacity of the insurance industry to meet its obligations on claims that may arise from the destruction across the country.
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However, two issues would arise because the context of the claims are huge and would come in at the same time; there will be no spread, thus this will impact the finances of the underwriters and may destabilise their finances.
What happened was as a result of breakdown of law and order. Section 14 (2b) of the Nigerian Constitution vests the duty of guaranteeing security and providing for the welfare of the citizens in the hands of government – the executive precisely. I will look at the damages from the protest as a failure of the government to provide security and welfare for the citizens.
The section says the “security and welfare of the people shall be the primary purpose of government.” Thus insurance companies have a subrogation right – the right to recover from the government their funds after they pay the claims arising from the destruction.
Therefore, I advise the insurance companies to pay their claims and seek refund on the basis of Section 14 (2b) of the Constitution of the Federal Republic of Nigeria.
Would the government make refunds to the insurance companies?
Interestingly, the government has the machinery to pay the insurance companies, but it is a dormant machinery. I don’t want to speak for the government, but it is there. The most interesting thing is that the government can settle the insurance industry without taking a dime from the treasury.
How would it be able to do this?
I won’t disclose that, but the machinery is there and the money is there.
Let them approach me. However, there are two sides to it. I can’t speak for the government, but I can talk about raw insurance. The government can pay whatever the amount of claim is without recourse to the treasury. There is the possibility to turn on that machinery and make it sustainable. The section of the constitution above provides insurance interest to the government for the welfare and security of the people.
Can those without insurance still get government’s compensation?
Of course, yes. If the government contacts me, I am available; free of charge as a patriotic citizen. Continuing on the matter, we have established the fact that the government has insurable interest established in the constitution. It is now left for us to situate these variables within the context of what happened. The security and welfare of the people were compromised before, during and after the protest. The welfare of the people – poverty – was the major driver of the #EndSARS protest. Those that were affected, their security had been breached. When you talk of government, you are talking of the three tiers: executive, legislature and judiciary. So we need to allocate the risks that breached the welfare and security of the people to the local, state and federal governments.
How does this risk allocation work?
Local risks can be appropriated to the local government authorities. Local risks like farmers and herders clashes, community clashes, local boundaries clashes (land disputes) and things that are clear responsibility of local governments to deal with. The fallout can be destruction of farms, property and lives.
To the extent of the constitution, the local governments have insurable interest in those. And if these losses occur, the local government should pay. Of course there are adequate statistics at the local governments to apportion value. The communities can insure their property against fire and destruction and the people there can be insured against death and bodily injury (group and personal accidents) by the local government too. There are necessary insurance products to address these. In the context of the #EndSARS protest and the destruction that happened, the looting of local government warehouses and the burning down of the houses of local politicians and rich men or looting their houses, insurance companies will pay the local government administrations if insured.
For the state governments, they should insure the general populace in their domains for death and bodily injury when any riot occurs or whenever there is breakdown of law and order. They should also insure their assets.
If the insurance companies do not get a refund from the Federal Government, can they sustain the business after paying claims especially in this recession?
The compensation from the government is there. It is at zero cost to the treasury, so I don’t know why the government won’t refund the insurance companies and I don’t know why the insurance companies won’t ask for the refund. But to answer you, the largest mitigating factor is that I foresee a situation where the lack of insurance culture in the country will mean that a lot of the damaged property are not even insured.
For those that are insured, even if the losses are huge, I foresee a situation where the insurance companies come into play. If the underwriting companies have done their jobs property, there would be adequate reinsurance which will mitigate the risks on their portfolios. I foresee most of the payments being made by the reinsurance companies who are by their nature, stronger than insurance companies.
Is NICON buoyant to pay claims arising from this?
We expect to be part of the insurance companies that will pay claims. We are still waiting for the claims to be documented and at the appropriate time we will pay our claims.
Will the situation increase the prices of insurance products?
There would be panic by the underwriting houses and there would be that possibility of increasing the rates leading to increased insurance premium. However, going forward and reviewing the experiences of respective portfolios, insurance companies will be able to make appropriate adjustments to reflect the reality on the ground.
So if the situation is escalating by the experiences, the premium rate will continue to rise, but if it is beginning to emerge that the protests and riots are a one-off, the rates would begin to normalise.