Investors swoop on insurance stocks as reform act berths

Insurance stocks are rallying remarkably on the Nigerian Exchange Limited (NGX) and the probability is even high that these low-priced stocks will continue to outpace others in the market in this second half (H2) of the year.

The optimism around insurance stocks results from renewed interest in the hitherto penny stocks as investors price-in the positive impact of Nigerian Insurance Industry Reform Act (NIIRA) 2025.

The Nigerian Insurance Industry Reform Act (NIIRA) 2025 which was recently approved by President Bola Ahmed Tinubu repeals and consolidates several outdated insurance laws into a single, modern legal framework.

The new Act — a landmark legislation that strengthens Nigeria’s financial sector and accelerate the nation’s march toward a $1 trillion economy – also provides for comprehensive regulation and supervision of all insurance and reinsurance businesses operating within Nigeria.

At +91.41 percent NGX Insurance Index outperforms others…

As at Monday, August 11 the NGX Insurance Index designed to provide an investable benchmark to capture the performance of the insurance sector has risen this year by 91.41 percent, outpacing the NGX All Share Index (ASI) which has risen this year by 40.80 percent. Only this month following berth of Nigerian Insurance Industry Reform Act 2025, the NGX Insurance Index has risen by 54.28 percent.

“The recent signing of the Nigerian Insurance Industry Reform Act 2025 by the President has sparked renewed investor interest in insurance stocks, driven by expectations of sector-wide recapitalisation and regulatory-induced growth opportunities,” CardinalStone Research said in their August 11 Model Equity Portfolio (MEP).

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“This momentum translated into notable price gains across several insurance tickers. In line with the strong momentum observed, we plan to rotate into AIICO, funding the move by trimming our MTNN holdings to capture potential upside,” they said.

The NGX Insurance index comprises the most capitalised and liquid companies in insurance. Except Sunu Assurance with negative returns, other stocks in the insurance sector have recorded impressive returns this year.

All insurance stocks are on autopilot except Sunu Assurances…

BusinessDay check on the 15 most capitalised and liquid companies in insurance shows that AIICO Insurance has risen this year by 169.23 percent, Cornerstone Insurance (+95.83 percent), Sunu Assurances (-48.84 percent), Guinea Insurance (+71.60percent), Lasaco (+33.98percent), and Linkage Assurance (+91.53percent).

Others are: Universal Insurance (+83.33 percent), Veritas Kapital (+67.39 percent), Coronation Insurance (+95.83percent), Axa Mansard (+96.34 percent), NEM Insurance (+228.77 percent), Prestige Assurance (+65.29 percent), Consolidated Hallmark (+35.07 percent), Regency Assurance (+85.33percent), and Sovereign Trust Insurance (+166.9 percent).

In addition to the most capitalised insurance stocks, others that have risen remarkably this year are: Custodian Investment (+145.03 percent), Mutual Benefits (+426.23 percent), and Royal Exchange (+162 percent).

Overall sentiment stays positive…

“Our choice of AIICO, in addition to its strong momentum, is supported by its healthy asset and net asset base. The company boasts the largest assets and the second-largest equity base among members of the Insurance Index. In H1’25, AIICO achieved a 34 percent year-on-year (YoY) growth in insurance service revenue and a 49.7 percent increase in investment income, which together contributed to significant growth in its bottom line,” CardinalStone Research said.

“Momentum remains with insurance, while industrials face supply after today’s drawdown; expect continued rotation into high-beta names with tactically two-way flows in banks as investors position ahead of prints. Overall sentiment stays positive, but tapes are stretched, look for intraday whips and buy-the-dip interest in recently hit sectors,” according to Lagos-based Vetiva research analysts in their August 11 note.

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“We expect investor positioning to remain tilted toward fundamentally strong financial services stocks, particularly banks and insurers, given their resilient earnings profiles and attractive valuations,” United Capital research analysts said.

Assenting the NIIRA 2025 reaffirms government’s commitment to financial stability, economic development, and inclusive growth.

The NIIRA 2025 ushers in a new era of transparency, innovation, and global competitiveness for the insurance industry. It aligns with the Federal Government’s vision of achieving a $1 trillion economy.

Key provision of the NIIRA 2025…

The 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; and creation of dedicated policyholder protection funds, especially in cases of insolvency; and expanded participation in regional insurance schemes, including the ECOWAS Brown Card System.

The National Insurance Commission (NAICOM) is mandated 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.

The reform introduced by the new law is expected to catalyse new investments, boost consumer confidence, and position Nigeria as a leading insurance hub in Africa.

NIIRA 2025 seen ushering in mergers and acquisitions…

“In our view, these reforms are expected to reshape the competitive landscape of the industry, with the recapitalisation directive likely to pose challenges for the relatively smaller operators, given the existing market fragmentation amidst other structural bottlenecks,” CardinalStone Research said.

“Hence, we could see a wave of industry consolidation through mergers and acquisitions, as less-capitalised firms seek to meet the new thresholds within the stipulated timeframe. Insurers would be required to comply with the new capital requirements within 12 months of the law’s commencement, as stipulated by the National Assembly. However, we expect further regulatory guidance on implementation timelines, qualifying capital, and transitional provisions,” the analysts noted in their August 6 sector update.

“This development marks a significant milestone in the sector’s evolution, as it consolidates several insurance laws and repeals outdated regulations. In the coming months, we will closely monitor regulatory announcements and responses from industry players, particularly listed insurers, regarding their recapitalisation strategies and broader compliance plans under the new Act,” CardinalStone Research added.

Iheanyi Nwachukwu

Iheanyi Nwachukwu, is a creative content writer with over 18 years journalism experience writing on banking, finance and capital markets. The multiple awards winning journalist is Assistant Editor, BusinessDay. Iheanyi holds BSc Degree in Economics from Imo State University; Master of Science (MSc) Degree in Management from University of Lagos.
Iheanyi has attended several work-related trainings including (i) Advanced Writing and Reporting Skills (Pan African University, Lagos); (ii) News Agency Journalism (Indian Institute of Mass Communication {IIMC}, New Delhi, India); and (iii) Capital Markets Development and Regulations (International Law Institute {ILI} of Georgetown University, Washington DC, USA).

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