GENERAL INTRODUCTION

Background to the Study

The annexation of Cameroon by Germany which after the First World War fell under the

control of Britain and France brought in the application of foreign laws into the country. These

laws adopted by the mandated powers were applied into the various activities of these mandated

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. Ordinance

No. 5 of 1924 stated that all Ordinances enacted in Nigeria after February, 1924 were applicable

to the Cameroons under British mandate. This Ordinance is thus the enabling legislation which

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.¹ The decree

of 22^nd May, 1924 on the application of French Law in Cameroon is the enabling statute which

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 which is intended to apply uniformly throughout Cameroon.²

Insurance in its modern form was not known in most of 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, the French speaking countries of Africa, insurance

principles and practices adopted that of Metropolitan France.³

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 1950’s there were no indigenous insurance

companies 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,⁴ was their principal agent. British insurance companies operating in Nigeria extended

their activities to the 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.⁵

Insurance Law Reform (Amendment) 1977 deals with the application and introduction of

English and French laws due to colonization. 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. No-

fault system was used to compensate a large number of victims on a law cost. The CIMA code

was considered sovereign to national laws. Inter-African Conference of Insurance Market

(IACIM) was created. At 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.⁶

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 a

number of 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).⁷

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.⁸  Government control of insurers was initially accomplished through special legislative charters

and discriminatory taxation, but this proved to be an inefficient mechanism as the number of

companies grew and the need for ongoing oversight became apparent (Meier, 1988).⁹

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 adopt according to its preferences.

The historical development of regulation can also be seen at 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),¹⁰the 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.¹¹

Statement of Research Problems

The unfair and discriminatory treatment of stakeholders and customers and the violation by the

insurance companies to operate in accordance with laws and regulations serves as a major

problem to insurance policy holders 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 other real estate. These violations serve as a sufficient

reason for the government to supervise and regulate insurance companies.

Objectives of the study

Main Objective

The main objective is to examine the role of the government in the control and supervision of

insurance companies in Cameroon.

Specific objectives

• To examine the mechanisms used by the government to control and supervise insurance

companies in Cameroon.

• To evaluate the importance for government to supervise and control insurance

companies in Cameroon.

• To assess the reasons for government control and supervision of insurance companies

in Cameroon.

• To examine the challenges faced by the government to control and supervise insurance

companies in Cameroon.

Research Questions

Main Research Question

What are the role of the government in the control and supervision of insurance companies in

Cameroon?

Specific Questions

• Organs charged with the control and supervision of insurance companies in

Cameroon

• What are the mechanisms used by the government to control and supervise insurance

companies in Cameroon?

• Why is it important for government to supervise and control insurance companies in

Cameroon?

• What are the reasons for government control and supervision of insurance companies

in Cameroon?

• Consequences for the non-respect of government policies by insurance companies in

Cameroon

• What are the challenges faced by the government to control and supervise insurance

companies in Cameroon?