Abstract

This work centred on the Government Control and Supervision on Insurance Companies in Cameroon has studied the fundamental aspects of government control over the insurance industry. The intention to which the government supervises the Insurance industry has many reasons and the purpose for which the government supervises these companies is numerous.

The desire to protect the insuring public against the possibility of loss through operations of dishonest or incompetent insurers has been one of the fundamental consideration for the control and supervision of insurance companies. Under the CIMA Code, government control has been classified as preventive, concurrent and final.

In addition, the bodies responsible for insurance regulation are the organs in charge to regulate the effectiveness of the companies. These organs have subdivided into the Regional and National levels. This work deepens to analyze these organs and the importance of government regulation.

CHAPTER ONE

GENERAL INTRODUCTION

1.1 Background to the Study

The annexation of Cameroon by Britain and France brought in the application of foreign laws into the country.  These laws adopted by the colonial powers were applied to the various activities of these colonial powers carried out in their respective territories such as in the area of administration, legislation, economic, social and political activities. 

The Cameroon legal system thus experienced the application of both the common law and civil law respectively.  Under Ordinance No. 5 of 1924, all Ordinances enacted in Nigeria after February 1924 applied to the Cameroons under British mandate.  This Ordinance is thus the enabling legislation that makes the application of Nigeria and English Law possible in Cameroon.  Section 11 of the Southern Cameroons High Court Law of 1955 gives a clear provision to this effect.  The decree of 22^nd May 1924 is the enabling statute that renders the application of French law possible in Cameroon. 

The effect of this was to introduce, among others, the French Civil Code (Code Civil or Code Napoléon) and the French Commercial Code (Code de Commerce) which continue to serve as the primary source of civil law in French-speaking Cameroon.  Further laws were rendered applicable by order of the Government of French Cameroon.  In 1930, the Insurance Law of 13 July 1930 was passed by the legislator in France. 

In the specific domain of Insurance law, until the introduction of the CIMA Code, there was no general uniformity; isolated instances increasingly exist of legislation that is intended to apply uniformly throughout Cameroon.         Insurance in its modern form was not known in most black African countries until the early nineteenth century. 

The early European colonizers brought to their various territories the idea of modern insurance.  In the English – speaking countries, the idea was introduced by the early British merchants and today insurance law and practices in these areas are almost entirely patterned along British lines.  Similarly, in the French-speaking countries of Africa, insurance principles and practices adopted that of Metropolitan France.

Following the independence and the consequent economic involvement of Cameroonians and the government in all spheres of the economic life of the country, legislation was passed to organize insurance companies in the country.  The first of these legislations was Ordinance No. 62 – DF – 36 of 31^st March 1962 fixing the legislation applicable to the operation and organization of insurance. 

This has thus led to the massive increase of insurance companies competing in the Cameroonian insurance market. Until the 1950s no indigenous insurance companies were operating in Cameroon.  Contracts of insurance were effected by established insurance companies in France and Britain.

  Later on, these insurers appointed local agents to represent them and maintain their headquarters in the mother country.  These agents were principally expatriate banks and traders who were given powers of attorney to effect insurance business, issue of cover notes and serve claims.  One of the first insurance companies to have branch offices in Nigeria in 1921 was the Royal Exchange Assurance. 

Later on, in 1960, they moved to Cameroon.  In the case of the Royal Exchange Assurance Limited v. Barclays Bank DCC, was their principal agent.  British insurance companies operating in Nigeria extended their activities to Southern Cameroon through their Nigerian headquarters to Victoria now called Limbe.  In French-speaking Cameroon, the first French Insurance agency operating in Douala in 1953 was Groupement Franҫaise d’Assurances later known as Assureurs Conseils Camerounais.

Insurance Law Reform (Amendment) 1977deals with the application and Introduction of English French laws due to colonization.  The probability of winning a case relied on the type of court used either a civil court or a common-law court thus called for amendments.  Insurance laws were not textual.  Resolutions taken from the conferences held were not effective. 

A no-fault system was used to compensate a large number of victims at a low cost.  The CIMA code was considered sovereignty to national laws.  Inter-African Conference of Insurance Market (IACIM) was created.  In the national system, political bureaus could influence the laws of the country.  Article 45 of the constitution ratified the laws given by the president. 

Laws backing insurance in Cameroon today include; The Constitution (Article 43), the CIMA Code, Article 26 P (2) and Article 36 P (1) of the 1996 constitution provide for legislative powers (parliament), Article 61 of the CIMA Code has been ratified for English Speaking Countries.

The evolution of insurance regulation has its roots in the early 1800s when insurance markets were generally confined to a particular community.  The high concentration of risk and the occurrence of large companies led to highly cyclical pricing and periodic shakeouts when several property-casualty companies would fail after a major fire (Hanson, Dineen, and Johnson, 1974). 

Life insurers became notorious for high expenses, shaky finances and abusive sales practices (Meier, 1988).  The local orientation of insurance markets at the time led municipal and state governments to establish the initial regulatory mechanisms for insurance companies and agents

Government control of insurers was initially accomplished through special legislative charters and discriminatory taxation, but this proved to be an inefficient mechanism as the member of companies grew and the need for ongoing oversight became apparent (Meier, 1988).  Insurance commissions were then formed by various states to license companies and agents, regulate policy forms set reserve requirements and administer financial reporting. 

Early on, the states recognized the need to coordinate their insurance regulatory activities.  This led to the formation of the National Association of Insurance commissioners in 1871 (NAIC).  Its initial activities primarily focused on the development of common financial reporting requirements for insurers.  State regulators also used the NAIC as a vehicle for discussing common problems and developing model laws and regulations which each state could modify and adapt according to its preferences.

The historical development of regulation can also be seen in a wide view.  Insurers were initially subject to few regulatory controls; Paul v. Virginia, 75 U.S 168 (1868) affirmed the right of the states to regulate insurance. 

The court ruled that insurance was not interstate commerce.  In United State v. South-Eastern Underwriters Association (1944), the court ruled that insurance was interstate commerce when conducted across state lines and was subject to federal regulation.  The McCarran – Ferguson Act (1945) states that continued regulation and taxation of the insurance industry by the states are in the public interest.

1.2 Statement of Research Problems

The unfair and discriminatory treatment of stakeholders and customers and the violation by the insurance companies to operate by laws and regulations serve as a major problem to insurance policyholders and the state at large. 

Despite the laws laid down by the state to regulate insurance activities, the insurance companies violate these laws and still operate with their activities.  Violations often result from management unfamiliarity with, or misinterpretation of, governing statutes and regulations. 

Insurance companies also violate government regulations through their act of negligence and willful noncompliance with state laws and regulations.  Violations such as; securities unlawfully acquired or held, charge–off nonconforming assets, nonconforming another real estate.  These violations serve as a sufficient reason for the reason of government supervision and regulation of the insurance companies.

1.3 Research Questions:

• What are the regulations, control and importance of insurance companies?
• Are there any relevant mechanisms for the control and supervision of insurance companies in Cameroon?
• What are the Appraisals of Government Supervisory Control and Supervisory Power?

1.4 Objectives of the research

The objectives are of two folds: General Objectives and Specific Objectives.

1.4.1` The General Objectives

• To examine the background idea for the reason of government intervention and control of insurance companies.

1.4.2 Specific Objectives        

• To examine the regulations, nature and importance of insurance companies in Cameroon.
• To examine the relevant mechanisms of the control and supervision of insurance companies by the government.
• To evaluate the appraisal of government supervisory control and supervisory power.