Insurance Firms Get 12-Month Ultimatum to Boost Capital or Lose Licenses
The Federal Government has mandated a major increase in the capital base of insurance firms, giving them 12 months to meet the new thresholds or face licence revocation.
The directive, issued by the National Insurance Commission (NAICOM) under the recently enacted Insurance Industry Reform Act signed by President Bola Ahmed Tinubu, marks the sector’s most significant recapitalisation in nearly two decades.
Under the revised structure, non-life insurance companies must raise their minimum capital from ₦3 billion to ₦15 billion, life insurance firms from ₦2 billion to ₦10 billion, and reinsurance companies from ₦10 billion to ₦35 billion. The aim is to improve insurers’ risk management capacity, ensure faster claims settlement, and strengthen investor confidence.
“A capitalised insurance sector means insurers can take on bigger risks, give businesses the confidence to expand, and create the stability the economy needs,” Ikeoluwa Alabi, an analyst at Afrinvest West Africa, told Bloomberg.
“Recapitalisation, combined with compulsory insurance enforcement, means stronger balance sheets, better claims-paying ability, and more trust from the public.”
The announcement sparked optimism in the equity market, with the NGX Insurance Index gaining nearly 8%, even as the broader All-Share Index dipped by 0.1%, highlighting investor confidence in the sector despite wider market volatility.
This policy is part of President Tinubu’s wider economic growth strategy, which targets expanding Nigeria’s GDP from $243 billion to $1 trillion by 2030. Other initiatives include a tenfold increase in bank capital requirements, easing foreign exchange controls, removing fuel subsidies, and overhauling the tax system.
To ensure effective execution, NAICOM has formed an 11-member monitoring committee tasked with verifying capital sources and ensuring compliance with the new benchmarks.
The reform is expected to trigger mergers and acquisitions as smaller players seek to combine resources to meet the new requirements. Industry stakeholders have welcomed the move, citing its potential to raise insurance penetration levels and align Nigeria with global standards.
The new minimum capital rules replace requirements that have been in place since 2007, despite rising inflation and increasing operational risks. The framework also incorporates a risk-based capital model, allowing companies to align capital holdings with their risk appetite while observing the new statutory minimums.
