Differential Premium Assessment System: NDIC Solicits Stakeholders’ Inputs For Inclusive Framework

The Nigeria Deposit Insurance Corporation (NDIC) has solicited inputs from critical stakeholders towards making the Differential Premium Assessment System (DPAS) Framework more robust and all embracing.

The DPAS is aimed at introducing fairness into the premium assessment process, encouraging effective risk management practices in insured institutions and applying a risk differential approach in the deposit insurance premium assessment of insured financial institutions.

The DPAS introduced in 2008, targets at enabling banks in the lower risk categories to pay relatively lower premium rates, charge banks in the higher risk categories additional premium for their extra risks, incentivise regulatory compliance and mitigate moral hazard.

In a release by the Director, Communication and Public Affairs Department, Bashir Alhassan Nuhu, the NDIC indicated that the Differential Premium Assessment System Framework had been reviewed to make it more risk sensitive and account for significant developments that had taken place in the Nigeria banking system since its adoption in 2008.

It stated further that the review was informed by the need to ensure that the framework conforms to the recommendations of the International Association of Deposit Insurers (IADI) and other global best practices.

Bashir said now that the review is still at consultation stage, it is imperative for the Corporation to solicit input from its critical stakeholders, adding that the exposure draft has been placed on the Corporation’s Website, www.ndic.gov.ng for review.

The release urged stakeholders to forward their input, comments and recommendations to NDIC Director, Insurance and Surveillance Department on aliyuam@ndic.gov.ng latest by 30th June 2023.

The NDIC adopted the Differential Premium Assessment System (DPAS) in 2008 following the issuance of its framework in 2007 to differentiate premiums payable by Insured Financial Institutions based on their respective risk profile.

The DPAS was aimed at introducing fairness into the premium assessment process, encouraging effective risk management practices in insured institutions and applying a risk differential approach in the deposit insurance premium assessment of insured financial institutions.

The DPAS was also introduced to enable banks in the lower risk categories to pay relatively lower premium rates, charge banks in the higher risk categories additional premium for their extra risks, incentivize regulatory compliance and mitigate moral hazard.