With the passage of the Nigerian Insurance Industry Act (NIIRA 2025), the sector is all out to experience the long expected reality of underwriting business becoming the pillar of the economy. Sunday Ojeme writes
Unlike what obtains in some other countries, the Nigerian insurance sector has been running freely below where and what it should. Some of the tell tale signs of backwardness are largely visible from the operators’ inability to enhance penetration and adequately explore and exploit the huge human and natural resources.
With so many loopholes in place, Nigeria for years has sustained an abysmally low position in the continent coming behind countries like South Africa, Egypt and others in terms of penetration. With a population of over 200 million and huge financial and material investments, Nigeria’s insurance penetration of less than one per cent is among the lowest in Africa, far behind South Africa’s 13.7 per cent and Kenya’s 2.14 per cent.
Except for the strigents rules like minimum capital requirement to qualify companies to retain their licences to keep operating, the government needed to do more in the area of enforcement for the country to boast of a well embodied insurance sector even with a new law in place.
Defaults
Wrapped in the Nigerian factor of deriving satisfaction from sometime manipulated figures, emphasis by the operators has been more on premium and profits, rather than seeing the business from the angle of a social safety net where financial gains should be less celebrated but business and life support capacity played up, especially in a country like Nigeria where the economy is still struggling.
Claims payments, which should be the primary objective and highly celebrated to attract and convince would be policyholders, are in most cases given less publicity than premium and profit. While premium is always very easy to collect from policyholders, paying claims, in most cases, is usually riddled with obstacles, frustration and discouragement.
While some of the operators have managed to remain ethical and deliver on their agreements, others end up searching for loopholes and small prints to deny policyholders who suffer losses their claims. Efforts to right the wrongs including recent attempts to recapitalise before now met with resistance from the operators.
As at today, some annuitants with African Alliance and some policyholders in some other organisations have resigned to fate as return on their investments is nowhere in sight. Nevertheless, a new dawn has set in. As the industry has struggled for long, the recent assent of the Nigerian Insurance Industry Act (NIIRA) by President Bola Tinubu is about to breathe a new life into the sector.
Optimism
Following the new law, the sector regulator, the National Insurance Commission (NAICOM), is hitting the ground running first with the long awaited recapitalisation. NAICOM had earlier hinted that the Act would unlock growth, prosperity and potential in the insurance industry. It said the new law would mark a significant milestone in the country’s efforts to revamp the insurance industry after nearly two decades.
The Commission believes that it is a game changer for the Nigeria’s insurance industry, and is going to have high positive impact on the contribution of insurance sector to the country’s GDP and economy as a whole. In a circular released over the weekend, the Commission notified all insurance and reinsurance companies of the commencement of the recapitalisation exercise as prescribed by the NIIRA 2025.
Minimum Capital Requirement and Risk-Based Capital According to the regulator, the exercise, with a 12-month gestation, follows NIIRA 2025’s pattern of higher Minimum Capital Requirements (MCR) of N10billion, N15billion, N25billion and N35billion for life, non-life, composite and reinsurance companies respectively and a shift to a Risk-Based Capital (RBC) framework for insurance and reinsurance companies in Nigeria.
In line with the provisions of the Act, the new MCR takes effect from the date of Presidential assent, and all operators are required to comply fully within a 12-month period from the effective date.
Effective Date and Compliance
Period In line with the provisions of the Act, a 12-month period has been provided for insurers and reinsurers to comply with the new MCR as well as the applicable RBC as may be determined. All insurers and reinsurers shall comply with the requirements on or before the 30th day of July 2026.
Guidelines and Circulars
The Commission shall, in due course, issue comprehensive guidelines and circulars detailing the modalities for the recapitalisation exercise. These shall include, but not limited to: The composition of the MCR; Acceptable forms of capital; Procedures for capital verification; Qualifying assets for MCR purposes and criteria such as title, ownership, and existence; A standardised template for computation of MCR.
Treatment of Assets For the avoidance of doubt, insurers and reinsurers are hereby informed that: Encumbered assets, assets without perfected title or ownership, and assets not in the full possession of an insurer/reinsurer shall be inadmissible for the purpose of meeting the MCR. Assets that exceed prudential thresholds or do not meet the prescribed criteria shall also be deemed inadmissible. Verification of Assets.
Efforts to right the wrongs including recent attempts to recapitalise before now met with resistance from the operators
All assets for the purpose of the new MCR shall be subject to verification by the Commission or its appointed agents. In addition, where, due to the nature or circumstances of an asset, the Commission deems it necessary to undertake further verification beyond the norm, the cost of such nonstandard verification shall be borne by the concerned insurer or reinsurer, among other requirement.
It also instructed that all insurance and reinsurance companies were required to commence internal preparations, outline recapitalization plan, engage proactively and take immediate steps to comply with the new minimum capital requirements within the stipulated 12-month period.
“The Commission is committed to ensuring a successful implementation of the recapitalisation exercise,” the circular noted. Over time, experts were of the view that the industry was largely undercapitalised, and efforts to increase the capital base were resisted by the operators, some of whom argued that insurance, unlike banks, did not require too much capital to operate as a business.
However, based on the current dispensation, the operators have no choice than to ship into the system by increasing their capital requirements to a total of N680 billion or more from N145 billion, which is the current operating capital base of the entire industry. The figure, which represents 368.97 per cent increase, covers the 46 frontline operators that are currently active in the industry.
This figure excludes micro insurance and takaful operators. According to the new Act, operators, who are into General business, are expected to increase their capital from the N3 billion, which they are operating with at the moment to N15 billion, those in Life business from N2 billion to N10 billion, Composite operators, N25 billion while reinsurers are expected to boost their capital from N10 billion to N35 billion.
At the moment, there are 29 General business operators, 14 Life operators, two reinsurers, 12 micro insurance operators and five takaful businesses.
Presidential directive
On signing the Act, the Presidency directed NAICOM to administer and implement the provisions of the NIIRA 2025 in a manner that unlocks the industry’s full potential and significantly improves insurance penetration across the country.
According to a statement, “this development reaffirms the administration’s commitment to financial stability, economic development, and inclusive growth. “The NIIRA Act 2025 ushers in a new era of transparency, innovation, and global competitiveness for the insurance industry.”
Apart from the new law enabling the operators to play big in the country, it is also expected to play a big role in Federal Government’s targeted $1trillion economy.
Failed recapitalisation
Recall that as far back as 2019, NAICOM, under Mohammed Kyari as Commissioner for Insurance, had unveiled a new operational capital structure for the operators.
The exercise, which was supposed to have ended on December 31, 2020, was tactically resisted by the operators until it fizzled out. Kyari had announced an increase in the minimum operating capital of operating firms under the tier-based capital regime that graded the industry’s capital into tier one, tier two and tier three.
This attempt faced resistance from operators and some minority shareholders, whom the insurers usually deploy as proxies to speak against such exercise and in some cases take the matter to court since they cannot come out openly to kick against their regulator’s policies and recommendations.
Another attempt to recapitalize the industry was during the immediate past Commissioner for Insurance, Mr. Sunday Thomas. The regulator reviewed minimum paid–up capital share of Life Insurance business from N2 billion to N8 billion. General Insurance business was raised from N3 billion to N10 billion, Composite business was raised from N5 billion to N18 billion and Reinsurance business was raised from N10 billion to 20 billion.
In the course of the exercise, NAICOM requested that the companies submit their recapitalisation plans for review. However, out of the 47 companies that forwarded their plans, the regulator granted 26 companies a ‘No Objection’ to proceed with their plans.
The plans of 17 companies were corrected and advised to resubmit their new plans using paid-up capital and not shareholders fund; four companies did not have the requisite 2018 financial statements and were thus advised to review their plans of using IPO; one company had litigation issues and was advised to resolve them as soon as possible to enable its progress; one other company’s submission was noted not to have met the necessary requirements, while three companies were yet to submit as at the time details of the review were made public.
Despite the perceived the attempt, the exercise also fizzled out even before he was removed from office, there by ushering in another platform of relief for the operators, who deploy every strategy to resist the exercise. However, based on the current development, the operators have no choice than to obey the law either by raising the needed capital through the instruments provided by law or resort to merger while the weak ones submit themselves for acquisition.
Speaking on the need for the underwriters to prepare themselves for a day like this, the Chairman Emeritus of ISAN, Sunny Nwosu, during one of the insurance companies’ AGMs in Lagos, had said: “You must start to plan on how to raise your capital because it must come given what I have read concerning the new proposed bill.”
Capital market boom
It is on record that since the Act was signed, the insurance industry has continued to experience some positive momentum, especially in the capital market, where the stocks are gradually moving from trading in kobo to trading in naira.
According to reports, the first two day after the Act witnessed a huge profit driven by the sector. The equities market staged a blistering rally with investors raking in a staggering N1.580 trillion in just two trading days, spurred by the landmark signing of NIIRA 2025 by President Tinubu. From a market capitalization of N91.149 trillion on Monday, August 4, the Nigerian Exchange (NGX) surged to N92.730 trillion by close of trading on Thursday, August 7— an unprecedented upward swing that reflects resurgent investor confidence in the insurance sector and wider market fundamentals.
On Thursday alone, the market added N478.83 billion, up from N92.251 trillion the previous day, marking a 0.51 per cent daily gain. The All-Share Index (ASI) followed suit, climbing 756.85 basis points to close at 146,570.71, pushing year-todate (YTD) returns to an impressive 42.40 per cent. The epicentre of this bullish charge was the NGX Insurance Index, which recorded back-to-back double-digit gains—+9.87 per cent on Wednesday and +8.76 per cent on Thursday—its most aggressive twoday performance since June 2023.
Eighteen of Thursday’s 44 gainers were insurance stocks, with AIICO Insurance, AXA Mansard, and Cornerstone Insurance each hitting the maximum daily gain of 10 per cent. SUNU Assurance was the only laggard in the sector. The explosive rally was ignited by the promulgation of NIIRA 2025, a sweeping legislative overhaul poised to reposition Nigeria’s insurance landscape.
The insurance sector’s weekto-date return ballooned to +31.74 per cent, with its YTD performance standing at +59.69 per cent, making it the second-best performing sector on the NGX this year behind Consumer Goods (+78.86%). Analysts believe the NIIRA 2025 marks a generational shift for the industry, providing long-overdue structural reforms that will deepen market penetration, restore public trust, and catalyse foreign investor interest.
“The insurance sector has been the sleeping giant of the financial services industry for decades,” noted one capital market analyst. “This law has woken it up.”
Stakeholder’s view
Commenting on the law, the Nigerian Insurers Association (NIA) described it as a pivotal legislation that sets the stage for transformative progress across the insurance ecosystem and the broader financial services landscape.
The Chairman of the association, Mr. Kunle Ahmed, said the Act represented a bold step toward strengthening the regulatory framework, enhancing public trust, improving market penetration, and modernizing operations within the industry.
According to him, it reflects the Federal Government’s commitment to deepening financial inclusion and ensuring that insurance becomes a robust pillar in Nigeria’s economic architecture and in line with the president’s vision for achieving a $1 trillion economy by 2030.
“The Association extends heartfelt gratitude to all stakeholders whose tireless efforts shaped the development and successful passage of the Act: the National Assembly, for their deliberations and legislative stewardship, the National Insurance Commission (NAICOM), for regulatory guidance and technical expertise, and other key government agencies, our esteemed member companies, whose feedback and vision have been invaluable and the civil society advocates, academia, and policy experts who contributed insight and integrity throughout the reform process.
Your collaborative spirit and unwavering commitment to the future of insurance in Nigeria have made this achievement possible. “As a leading voice of the industry, the Nigerian Insurers Association pledges its full support toward the successful implementation of the NIRRA Act.
We are dedicated to facilitating sector-wide understanding and adoption of the Act’s provisions, engaging our member companies and stakeholders through capacity-building, advocacy, and technical support, partnering with regulators to ensure seamless execution and compliance and promoting innovation and inclusion, in line with the goals of the legislation.
“This is not just a legislative victory; it is a shared mission. NIA stands ready to champion a more resilient and customer centric insurance sector that contributes meaningfully to national development,” he added.
Dissent/Last line
However, despite the wide acceptance, Ondo South Senator, Jimoh Ibrahim, had earlier expressed concerns that the increment of insurance capital would lead to the extinction of insurance companies in the country.
“We only have one reinsurance company, and now increasing the capital. As a matter of fact, 20 per cent of that will be deposited in CBN forever. This increase will lead to their death,” he argued. The senator, who owned the Nicon Insurance Ltd and Nigeria Reinsurance Corporation until they were taken over by AMCON in 2021 over an alleged debt, recommended that the current capital requirement of N2 billion for insurance companies be retained.
𝗙𝗼𝗹𝗹𝗼𝘄 𝗢𝘂𝗿 𝗪𝗵𝗮𝘁𝘀𝗔𝗽𝗽 𝗖𝗵𝗮𝗻𝗻𝗲𝗹 𝗧𝗼 𝗚𝗲𝘁 𝗟𝗮𝘁𝗲𝘀𝘁 𝗡𝗲𝘄𝘀 𝗔𝘀 𝗜𝘁'𝘀 𝗗𝗿𝗼𝗽!
