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Nigeria’s insurance sector has entered a high-stakes race for survival as the recently enacted insurance reform act triggers the most aggressive recapitalisation drive in decades.
The new law, designed to boost solvency and rebuild public trust, mandates steep capital thresholds of N10 billion. N15 billion, N25 billion, and N35 billion for life, non-life, composite and reinsurance companies, respectively.
It is a shift to a risk-based capital (RBC) framework for insurance and reinsurance companies in Nigeria.
In line with the provisions of the act, the new law takes effect from the date of Presidential assent, and operators are required to comply fully within a twelve (12) month period from the effective date.
These thresholds represent a significant increase from the previous levels and signal a bold move to align Nigeria’s insurance sector with global best practices.
The National Insurance Commission (NAICOM), the industry regulator, said the changes are long overdue.
“For too long, insurers have operated on thin capital, making it difficult to underwrite big-ticket risks like oil and gas, aviation and infrastructure,” said a senior NAICOM official.
“These reforms are designed to make the market more competitive and trustworthy,” the official said.
The clock is ticking, and insurers have no time to waste.
NAICOM has given operators 12 months to comply, setting off a scramble for new funds through rights issues, private placements and strategic partnerships.
Already, major players in the industry are now reportedly in talks with foreign partners to secure capital injections.
Mid-tier firms are weighing mergers and acquisitions (M&A) as a survival strategy, while smaller players face a stark choice: consolidate or exit the market, as the regulator said.
Industry analysts believe that the recapitalisation drive could reduce the number of licensed insurers by as much as 30 per cent, creating a more stable but concentrated market.
Speaking on the new development in the industry, Senior Insurance Practitioner, Alfred Daudu, said this is not just helping operators to meet regulatory requirements but also about positioning for growth in a market that is set to expand.
Industry sources confirmed that private equity firms and global insurance groups are exploring opportunities in Nigeria, betting on a sector that has long been underpenetrated.
“Insurance penetration in Nigeria is below three per cent of GDP, one of the lowest in Africa,” said Tope Adeyemi, partner at a Lagos-based investment advisory firm.
“With stronger regulation, investors see a market that could grow fivefold in the next decade. However, macroeconomic headwinds pose challenges.
“Foreign exchange volatility and high interest rates could complicate capital raising, particularly for smaller firms. Some analysts fear that access to affordable capital will remain a bottleneck, leaving only the biggest players in a position of strength.
Beyond capital, the reform mandates digitalisation of core processes, including policy issuance, claims management and regulatory reporting.”
Consolidation is inevitable, said Kunle Ogunleye, a senior executive in the industry.
“But in the long run, a leaner, stronger industry will benefit everyone – policyholders, investors and the economy,” he said.
For consumers, the recapitalisation drive could translate to greater security and faster claims processing. The
Act introduces penalties for delayed claims and enforces transparency in policy terms.
This is expected to rebuild trust in an industry often criticised for poor customer service and opaque practices.
With NAICOM setting strict compliance targets, next year will determine the future shape of Nigeria’s insurance industry.
For operators, it is a race against time, a race that will test not just their financial muscle but also their ability to innovate and adapt.
As one senior executive put it: “This is not business as usual. The winners will be those who move fast, think big and embrace change.”
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