The House of Representatives on Wednesday approved a landmark bill aimed at reforming Nigeria's insurance sector, which includes a push for the recapitalization of insurance companies and stricter penalties for defaulters.
The bill, which recognizes two categories of insurance—life and non-life—sets higher minimum capital requirements across various insurance sectors. It seeks to repeal the Insurance Act 2004, Marine Insurance Act 2004, the Motor Vehicle (Third Party Insurance) Act 2004, and the National Insurance Corporation of Nigeria Act 2004, replacing them with updated regulations that aim to promote a competitive, innovative, and viable insurance industry in Nigeria.
The reform package also stipulates that individuals or entities wishing to operate insurance businesses must meet specific capital thresholds. For non-life insurance, the required capital is set at N15 billion, while life insurance requires a N10 billion base. Reinsurance companies will need a N35 billion capital base. Additionally, insurance operators will be subject to risk-based capital requirements, which will take into account operational, market, and insurance risks.
Penalties for non-compliance are severe, with unlicensed operations facing fines of N25 million or two years imprisonment for individuals and N50 million or two years imprisonment for companies. The National Insurance Commission (NAICOM) has also been empowered to revoke licenses for insurance companies that fail to meet capital or solvency requirements or engage in poor business practices.
The bill also sets clear guidelines on how insurance companies can operate, including restrictions on the opening and closing of branch offices, approval for principal officers, and rules governing the payment of dividends. Notably, the bill requires that all public buildings, government assets, and transportation vehicles be insured, and sets up a compensation fund for road accident victims.
Other provisions include the establishment of the Insurance Policy Protection Fund, which will receive contributions from all insurers, as well as the Road Accident Victims Compensation Fund, which aims to assist victims of road accidents. The bill also mandates that insurance companies offer coverage for public employees, healthcare providers, and other critical sectors.
With this bill, the Nigerian insurance industry is poised for substantial transformation, and once signed into law, it will enhance consumer protection, improve financial stability, and facilitate growth in the sector. The law is expected to foster an environment conducive to both local and international investors while addressing longstanding challenges in the industry.
