Credit rating firm DataPro Nigeria has revealed that the signing of the Nigerian Insurance Industry Reform Act 2025 has amplified the role of the operating environment, the quality and value of capital, and other factors when rating insurance firms.
This was disclosed in the September edition of the Rating Brief published by DataPro Nigeria on Monday.
President Bola Tinubu recently signed into law the NIIRA 2025, and it included a wide range of reforms, including a substantial increase in minimum capital requirements for insurance companies. The new Act introduces critical measures such as stringent capital requirements to ensure the financial soundness of operators, enforcement of compulsory insurance policies to enhance consumer protection, digitisation of the insurance market to improve access and efficiency, zero tolerance for delays in claims settlement, creation of dedicated policyholder protection funds, especially in cases of insolvency, and expanded participation in regional insurance schemes, including the ECOWAS Brown Card System.
Indicating how the law would impact the rating of insurance firms, DataPro stated, “An insurer’s strength is closely linked to the economic and regulatory context in which it operates. The NIIRA 2025 has significantly changed this context by consolidating outdated laws and mandating Risk-Based Capital. Companies will be assessed on their ability to adjust to these new standards while also navigating macroeconomic and competitive pressures.
“The depth and quality of an insurer’s business model are central to its rating. Important factors include:Market Share & Branding: Larger firms often benefit from efficiency and recognition, but smaller players can still compete effectively through niche focus or strong customer loyalty. Diversification: A spread across different products, geographies, and policyholders lowers concentration risks. Revenue Stability: Recurring premiums and renewals are seen as more reliable than one-off or project-based income streams.
With the Act expanding compulsory insurance, covering areas such as group life assurance, public buildings, and government assets, insurers with strong distribution and compliance strategies will be better positioned to achieve sustainable revenue growth.”
On capital adequacy, the rating firm indicated that ratings will consider not just the amount of capital but also its quality and flexibility.
The firm added, “Well-capitalised companies are more resilient to shocks, while those with limited or less reliable capital bases face greater challenges. The 12-month compliance window may also drive industry consolidation as some firms seek mergers or acquisitions to meet the new thresholds.
“(Also) sustainable profitability is a key marker of financial strength. Diversified product offerings, disciplined underwriting, and efficient claims management all contribute to consistent earnings. Importantly, the NIIRA’s emphasis on timely claims settlement will bring greater focus to underwriting discipline and customer service, both of which influence earnings quality.”
DataPro also maintained that with NIIRA 2025 granting NAICOM broader supervisory powers, regulatory compliance has become a more prominent part of market standing, saying that “Insurers that demonstrate transparency, timely reporting, and adherence to new rules will be better placed to achieve stronger ratings and market credibility. The NIIRA 2025 sets a higher standard for Nigeria’s insurance industry, aiming to improve resilience, boost market participation, and strengthen consumer confidence. Ultimately, those companies that combine robust capitalisation, sustainable business models, prudent risk management, and strong governance will stand out as credible and trustworthy players in this new era of insurance.”
Players in the insurance industry were also called on to embrace strong governance and reliable systems to reduce operational risk.
“As the sector embraces digitisation and insurtech, companies must balance the benefits of efficiency and reach with the risks of system failures or cyber threats,” the firm concluded.
