Some Nigerian insurance companies have begun the process of recapitalising to meet the new minimum capital requirements of ₦10 billion for life insurers and ₦15 billion for non-life operators, in preparation for the industry’s overhaul expected in 2025.
This development follows the Senate’s passage of the Consolidated Insurance Bill, which mandates higher capital thresholds for insurance firms, including ₦35 billion for reinsurance companies. The bill, which aims to strengthen the financial capacity and global competitiveness of the Nigerian insurance industry, now awaits concurrence from the House of Representatives and Presidential assent.
Industry sources revealed that while some insurers have proactively increased their capital ahead of the regulatory deadline, others are awaiting the National Insurance Commission’s (NAICOM) formal announcement of the timeline, expected in the first half of 2025.
Mrs. Yetunde Ilori, Chairperson of the Insurance Industry Consultative Council (IICC) and President of the Chartered Insurance Institute of Nigeria (CIIN), expressed optimism about the bill’s passage. Speaking at the 2024 IICC Media Retreat in Asese, Ogun State, Ilori noted that the industry stakeholders were working closely with NAICOM to ensure the smooth enactment of the legislation.
“We are giving the bill the needed push and support to ensure it becomes a reality because we believe it will revolutionise the industry and deepen insurance penetration in the country,” Ilori stated.
The proposed recapitalisation benchmarks signify a significant leap from the existing requirements of ₦2 billion, ₦3 billion, and ₦10 billion for life, non-life, and reinsurance businesses respectively—thresholds that have been unchanged since 2007. The new regime introduces a risk-based capital approach, allowing firms to align their capitalisation with their risk appetite, with the specified amounts serving as minimum entry thresholds.
Adetokunbo Abiru, Chairman of the Senate Committee on Banking, Insurance, and Other Financial Institutions, emphasised the need for the capital increase during the bill’s presentation. He cited factors such as inflation, currency depreciation, and the need for alignment with the African Continental Free Trade Area (AfCFTA) as driving forces behind the amendments.
“These provisions will ensure that the insurance sector contributes positively to the financial system’s objectives and positions Nigeria as Africa’s financial hub and one of the 20 largest economies in the world,” Abiru noted.
The proposed legislation consolidates existing insurance laws, including the Insurance Act 2003, the Marine Insurance Act, and others, to create a more cohesive regulatory framework. It also incorporates mechanisms to address inefficiencies and outdated regulations that have hindered the industry’s growth.
However, concerns have been raised about the potential challenges for smaller operators. Senator Jimoh Ibrahim of Ondo South expressed fears that the increased capital requirements might lead to the collapse of some insurance firms.
“We only have one reinsurance company, and now increasing the capital—20 per cent of that will be deposited in CBN forever. This increase will lead to their death,” Ibrahim argued.
Despite these concerns, the senate voted overwhelmingly in favor of the committee’s recommendations, dismissing proposals to retain the existing ₦2 billion capital threshold.
The insurance industry has faced two previous failed attempts at recapitalisation, in 2019 and 2021, which were stalled due to litigation. Stakeholders believe the current bill addresses these challenges and provides a more structured pathway for implementing the new requirements.
If enacted, the Consolidated Insurance Bill will mark a turning point for Nigeria’s insurance sector, addressing decades-old issues and setting the stage for enhanced growth, innovation, and resilience in the face of evolving market dynamics.
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