The National Insurance Commission has issued a stern directive to 67 insurance and reinsurance companies to begin mandatory contributions to the newly established Insurance Policyholders Protection Fund.
The move is designed to create a financial safety net for Nigerians, ensuring that claims are settled even if an insurance firm becomes insolvent or has its operating licence cancelled.
Under the new guidelines, all affected operators, comprising 12 composite firms, 27 non-life companies, 13 life offices, 3 reinsurers, 8 micro-insurers, and four takaful entities, are required to remit 0.25 per cent of their Net Premium Income into the fund annually. The deadline for these remittances has been fixed for 30 June of every year.
An official statement from NAICOM warned, “Failure by any insurer or reinsurer to remit the full amount of its assessed contribution to the Insurance Policyholders’ Protection Fund within the stipulated timeframe shall constitute a ground for suspension or cancellation of its operating licence by the Commission.”
To ensure the integrity and growth of the protection fund, NAICOM has set a high bar for the financial institutions that will manage the assets. Fund managers must possess a minimum paid-up capital of N5bn and maintain a clean three-year audited financial record. The regulator emphasised that the fund will be held in top-tier Deposit Money Banks rated not below investment grade.
The NAICOM Regulatory Guideline noted, “The fund shall be managed independently by a competent Fund Manager appointed by the commission.
One of the selection criteria is a minimum paid-up capital of N5bn as well as SEC registration.”
The primary objective of the IPPF is to resolve distress and insolvencies within the sector. For years, policyholders in Nigeria have faced the risk of unpaid claims when insurance companies collapse.
This fund acts as a ‘lender of last resort’ for the insured. For the 2025 transition year, NAICOM noted that contributions will be prorated based on the number of days between 31 July and 31 December.
A representative of the Commissioner for Insurance said, “The objectives are to ensure protection of policyholders and beneficiaries; ensure timely and accurate collection of contributions; and promote transparency, accountability, and governance in the administration of the fund.”
With the 30 June deadline looming, the industry is now bracing for a tighter regulatory environment where financial discipline is no longer optional but a prerequisite for staying in business.
Historically, Nigeria has one of the lowest insurance penetration rates in Africa, less than one per cent of GDP. A primary reason is the ‘trust gap’, the public perception that insurance companies take premiums but disappear when it is time to pay claims. The IPPF is the government’s direct answer to this, acting similarly to how the Nigeria Deposit Insurance Corporation protects bank depositors.
This levy comes at a time when the industry is under intense pressure. NAICOM has been pushing for higher capital requirements to ensure only healthy players remain. The 0.25 per cent levy is a strategic ‘tax’ on success, using the premiums of the 67 surviving, healthy firms to ensure that if any of them slip into insolvency, the industry (rather than the government or the taxpayer) picks up the bill.
This move aligns with global environmental, social, and governance standards. By mandating that fund managers have N5bn in capital and SEC registration, NAICOM is ensuring that the protection fund itself is not lost to poor investment choices or fraud. It creates a ‘closed-loop’ of accountability that makes the Nigerian market more attractive to foreign investors.
