Nigeria’s insurance sector is set for sweeping changes as the long-awaited Insurance Industry Reform Act 2025, signed by President Bola Tinubu on Tuesday, takes effect. The landmark law aims to boost growth, attract foreign investment, and modernise operations, while sparking debate over the survival prospects of local insurers under tougher capital rules, OLUWAKEMI ABIMBOLA reports
Nigeria’s financial landscape is on the cusp of a significant transformation with the recent presidential assent to the Nigerian Insurance Industry Reform Bill 2025. This landmark legislation, now the Nigerian Insurance Industry Reform Act 2025, is hailed as a pivotal step towards strengthening Nigeria’s financial sector and accelerating the nation’s march towards the vision of a $1tn economy. While the Act is designed to usher in a new era of growth, innovation, and global competitiveness, particularly in attracting foreign investment, it also brings forth a cautious undercurrent of concern regarding the survival and potential dominance challenges for local insurance firms.
NIIRA 2025 represents a sweeping overhaul of Nigeria’s insurance legal framework, consolidating about five different pieces of legislation into a single, modern document.
According to the Commissioner for Insurance/Chief Executive Officer of the National Insurance Commission, Olusegun Omosehin, this modernisation process recognises all the current realities and what is required for a modern insurance sector to thrive, moving past the last legislative attempt in 2003.
Omosehin described NIIRA 2025 as a “win-win for every stakeholder” and a “major pillar in the drive to achieve the $1tn economy” envisioned by the current administration.
At the heart of the NIIRA 2025 are several critical measures aimed at reinforcing the industry’s robustness, enhancing consumer protection, and fostering efficiency.
Presidential spokesman Bayo Onanuga, who announced the assent to the bill, highlighted some of the impacts, one of which is the stringent capital requirements.
The Act mandates new minimum capital requirements, including the crucial shift to a risk-based capital framework. This means insurers will now calculate their capital based on the specific risks they face, encompassing insurance, market, credit, and operational risks, moving away from a one-size-fits-all approach previously in place. For instance, the proposed new minimum for non-life insurance business rose to N25bn (or RBC as determined by NAICOM) from N10bn, life insurance to N15bn from N8bn, and reinsurance to N35bn from N20bn.
The new law also puts in place a Policyholders Protection Fund, which is a significant new provision. This fund aims to give sufficient confidence and comfort to policyholders by providing a mechanism to pay claims in the event of an insurance institution’s insolvency. This directly addresses a critical missing link identified by NAICOM in managing distressed institutions.
NIIRA 2025 mandates digitalisation of the insurance market, a move which the regulator said will improve access and efficiency. The NAICOM boss in an interview on Channels TV noted that the new law recognises the role of fintechs and insurtechs.
Omosehin said that the goal is to simplify engagement, onboarding, claims payment, and processing, significantly reducing delays. This modernisation is also expected to open up the sector to Nigeria’s teeming youth, allowing them to engage with insurance institutions on platforms they are familiar with, such as their phones, making buying insurance simpler than traditional distribution systems. Also of interest to policyholders is the zero tolerance for delays in claims settlement.
The NAICOM boss said that it will issue clear regulations stipulating timelines and requirements that Nigerians can hold onto on this front.
He said, “I know this will interest a lot of Nigerians. Provisions are clear in the law. What you will see in the coming days is a situation where the National Insurance Commission, which is the agency that I head, will come up with a clear regulation that will stipulate the timelines and all those requirements that Nigerians can then hold on to. There is a framework already, but the detailed regulation will be rolled out by the commission.
“Mind you, the focus of the current administration is clear in terms of giving Nigerians the trust and confidence. Where the issue had been, oftentimes, was where you have insolvent institutions. In that regard, I think you recall that there was an institution last year where the National Insurance Commission had to take over, removing both the board and management, to appoint an interim board to run the affairs of those institutions. But the missing link in that process is when you take over, you then need to manage the institution in such a manner that, perhaps, selling some of their assets can meet their current obligations.
But the current law has made provision for a policyholders’ protection fund. That fund is where we would then draw money to meet those obligations immediately, whilst the institution is then allowed to look at other avenues of recapitalising and raising funds.”
The law also expanded compulsory insurance policies, further enhancing consumer protection and ensuring wider coverage. The Act gives the regulator more enforcement and oversight over institutions in the sector and expands the participation in regional insurance schemes, notably aligning with the ECOWAS Brown Card System, which allows Nigerians, once they buy their compulsory third-party insurance, to travel across the West African sub-region without additional requirements.
A catalyst for growth
A significant expectation stemming from the new legislation is the influx of new investments, particularly from foreign entities, due to the country’s weaker currency. The reform is broadly anticipated to catalyse new investments, boost consumer confidence, and position Nigeria as a leading insurance hub in Africa.
Professor Olajide Fadun of the Department of Actuarial Science and Insurance, University of Lagos, expressed optimism about this prospect.
He anticipates that more foreign investors are expected to come in, driven by Nigeria’s key position in Africa and the African economy and the global search for investment opportunities. He believes these new investors will seek to “grow with the economy” and “tap into the benefits that will come from the new government policies”.
While initial numbers might be few as investors “test the water”, Professor Fadun is confident that once early investors “are making a profit, others will start coming”.
Furthermore, he also claimed that insurance penetration in Nigeria is improving and will be key to attracting foreign investors, alongside local ones, including banks and businessmen from other sectors. The Act is seen as crucial for instilling confidence in both foreign and local investors.
The benefits of foreign investment are multi-faceted, according to Professor Fadun. Foreign investors are expected to bring much-needed funds into the sector. Crucially, they are also anticipated to act as “watchdogs”, ensuring that companies perform well so that their investments yield good results. This oversight, in turn, is expected to enhance public confidence in the insurance sector and prompt companies to be “more prompt in handling and settling claims”. Overall, their involvement is projected to have a “positive impact on the sector, on the insurance company, and on the insuring public”.
Beyond direct capital infusion, the new Act is also expected to improve access to the international insurance market.
“It will translate into several benefits to the insuring public, one of which is that access to the international insurance market will be more favourable. At the moment, we have three reinsurance companies in Nigeria, which obviously cannot reinsure the risk. Even when they reinsure the risk, they also have to reinsure part of the risk. With this new Act, the insurance market, local and international, is going to be able to welcome more risks from Nigeria. So, it is going to improve access to the reinsurance market globally. And if access to the reinsurance market is improved, then there will be more capacity on the part of the insurer to accept more risks.
“What it means is that larger risks can be insured. And some of them can be retained there. This will now result in a reduction in capital flight.
Because they will be favourably disposed to accept businesses from the Nigerian insurance company. Knowing full well that there is an increase in local investment in the industry. So, this will further open up the insurance market for the Nigerian insurance company globally.”
A shadow of caution
Despite the widespread optimism and the significant potential for growth and foreign investment, there is a concern among some stakeholders regarding the impact on local insurance firms, particularly in navigating the stringent new capital requirements. Deputy General Manager for Corporate Communications and Investor Relations at Sovereign Trust Insurance Plc, Mr Segun Bankole, articulated these fears in an interview with the News Agency of Nigeria.
Bankole warned that if local insurance firms are forced to borrow or undergo mergers to meet new capital thresholds without adequate market support, it could strain their operations.
He said, ‘With the new Act, recapitalisation is now enabled, which is commendable. However, if not properly managed, there is a risk that foreign players with stronger currencies could dominate the sector. If companies are forced to borrow to increase their capital base or they go into mergers and acquisitions, what happens if, at the end of this, insurance patronage remains low?’
He noted that unlike in other parts of the world where insurance is an integral part of everyday life, in Nigeria, “low purchasing power has relegated insurance to the background for many citizens.” To counteract this, Bankole strongly advocated for “sustained public enlightenment and government-backed initiatives to encourage wider adoption of insurance among Nigerians.” He emphasised that while the reform is a welcome development, the government must follow through with support to ensure the industry not only survives but flourishes.
Stakeholder reactions and the path ahead
The overall reception from major industry bodies has been overwhelmingly positive, acknowledging the Act’s transformative potential.
The Nigerian Insurers Association, in a statement signed by its Chairman, Kunle Ahmed, commended the Tinubu presidency for the assent, saying, “This Act, signed into law by President Tinubu, represents a bold step toward strengthening the regulatory framework, enhancing public trust, improving market penetration, and modernising operations within the industry. 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 $1tn economy by 2030.”
NIA went on to pledge full support for the implementation of the Act: “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.”
Similarly, the Nigerian Council of Registered Insurance Brokers commended President Tinubu, affirming that the law would “unlock the huge potential of the insurance industry” and herald “a new era of growth, innovation, and protection for insurance consumers”.
The NCRIB President, Babatunde Oguntade, believes the Act cures previous “regulatory inhibitions” that prevented the industry from playing its catalytic role despite its huge potential. He advised the Federal Government to ensure the Act is “gazetted and implemented expeditiously”, urging relevant government agencies to “work tirelessly to develop regulations and guidelines that will facilitate the effective implementation”. Oguntade also called on insurance operators to “take maximum advantage of the law and make it achieve the goal of making the industry a key pillar in the $1tn economy.”
For NAICOM, the regulatory body, the focus now shifts to “full implementation” of the law’s provisions. Omosehin emphasised that “the taste of the pudding is in the eating,” implying that the ultimate success of the Act will hinge on how effectively the regulator implements its provisions for the benefit of the economy. NAICOM’s role is clearly defined as providing “that enabling environment for our businesses to thrive,” which the new law has successfully provided.
Overall, NIIRA 2025 stands as a testament to the nation’s commitment to fortifying its financial sector and achieving ambitious economic goals. It promises a more robust, digitised, and consumer-centric insurance landscape. However, its success, as multiple stakeholders have highlighted, will depend on implementation. For now, the journey towards a truly transformed insurance sector, as envisioned by the NIIRA 2025, has only just begun.
