The move by the National Insurance Commission to upgrade minimum capital requirement of operating insurance and reinsurance firms will succeed due to obvious legal backing, writes EbereNwoji 

Since 1997 when the then commissioner for insurance, late Chief Oladipo Bailey instituted a remarkable recapitalisation excise that shook the entire industry, recapitalisation and re-registeration exercises for operating insurance and reinsurance firms in Nigeria have often been marredby controversies and litigations which often leave the exercise in a state of inconclusiveness.

At that particular time, Bailey, who was unhappy at the existence of numerous weak insurance firms in the system who could not pay even the least claim, jacked up minimum capital base of insurance firms from N20 million to N150 million for life insurance firms, N200 million for  general business underwriters, N350 million for composite firms and N500million for reinsurance firms.

The industry operators kicked against this and instituted no less than nine court cases against the National Insurance Commission(NAICOM).

Since then, every recapitalisation move by NAICOM has met serious opposition from some operators whose firms obviously have weak financial base.

They co-opted other stakeholders like shareholders to fight against the regulator and often end up securing court injunction to stop the success of the exercise.

Indeed, some chief executive officers of NAICOM have at one time or the other paid dearly for instituting recapitalisation in the industry as the opposing operators and their agents used the opportunity to frame up issues and causing their removal from office.

While some commissioners who tried to institute the exercise risked jail sentence which climaxed in their paying the supreme price of dying in the process, others lost the opportunity of serving their second terms in office. 

From Chief Oladipo Bailey to Chief Emmanuel Chukwulozie, to Fola Daniel who concluded the 2007 recapitalisation exercise started by Chukwulozie and successfully finished his tenure. Then to Alhaji Mohammed Kari who could not secure his second tenure because of the same problem then, to Sunday Thomas whose recapitalisation law suits from operators and shareholders remained hanging until he left office after his first tenure.This is because of activities of opposition parties who often withstand the regulator anytime such initiative comes up.The leaders of these opposition parties were often deliberate in their efforts to frustrate every planned recapitalisation exercise as they employed every available instrument and agents in form of shareholders.

Frustrating NAICOM’s Offort

The result is that despite the high rising inflation level from the period the last and only conclusive recapitalisation exercise in the industry was done in 2007, the insurance sector has not been able to effect any known and conclusive recapitalisation exercise again.

This is because several attempts made were frustrated by the opposition parties leaving the industry with the prevailing ridiculous and low-level capital base of N2 billion for life business underwriters, N3 billion for non-life underwriters, N5 billion for composite firms and N10 billion for reinsurance firms.

This is so whereas a similar member of the finance services sector like pension sector of has carried two round of recapitalisation exercises successfully.

PenCom had since inception of Contributed Pension Scheme (CPS) effected recapitalisation in the industry twice from the starting point of N150 million to N1 billion then to the present level of N5 billion. The Central Bank of Nigeria (CBN) has also done same for the banking sector, and again in March 28,2024 announced that a new capital regime would prevail in the industry effect from April 2026.Since the CBN announcement, nothing in form of controversy has been heard from operators and stake holders in the banking sector.Rather, every bank has been making efforts to ensure compliance before the expiration of the grace period.

Analysts’ view and New Law

Industry analysts who have been following trend of events in the insurance industry have given various interpretations to negative attitudes of insurance sector operators towards recapitalisation attempts.

While some attributed it to conservative attitude of the operators and their total averse to positive change, others interpreted it to be part of dubious nature of some insurance business operators who though know that their weak financial base could not allow them to pay genuine claims yet do not want the exercise to hold least they fall by the way side.

Apparently, the negative attitude of the insurers towards recapitalisation exercise in the industry was the reason behind enshrining the minimum required capital for the industry in the 2025 Nigerian Insurance Industry Reform Act (NIIRA) which was signed into law by President Bola Ahmed Tinubu, penultimate week.

This explains why less than a week after the presidential assent to the bill the commissioner for insurance, Mr Ayo Olusegun Omosehin, swung into action to announce a new capital regime for insurance industry.

NAICOM and New Capital base

NAICOM had on Friday last week announced a fresh recapitalisation exercise for insurance and reinsurance companies in Nigeria.

It said the initiative was a fall out of the enactment of the Nigerian Insurance Industry Reform Act (NIIRA) 2025, which was assented to by president Tinubu.NAICOM in a circular to insurance and reinsurance companies titled,“Implementation of New Minimum Capital Requirement (MCR),” dated August 12th, 2025  and signed by  the Deputy Commissioner for Insurance Technical,  Dr Usman Jankara, stated, “Following the enactment of the Nigerian Insurance Industry Reform Act (NIIRA) 2025 and assent of his Excellency President Bola Ahmed Tinubu, on the 31st of July 2025, the commission hereby notifies all insurance and reinsurance companies of the commencement of the recapitalisation exercise as prescribed by the NIIRA 2025.”

The commission in the circular said the new capital model being introduced would be based on Risk-Based model. The commission said based on the stipulations of the  NIIRA 2025 on introduction of  higher Minimum Capital Requirements (MCR), it has pegged the new operating capital for Life insurance business operators on N10billion, N15billion for non – life operators, N25billion  for composite firms that  is  those operating both life and non- business  and N35billion for reinsurance companies .

NAICOM also gave composite firms five years to decide which of the two lines of insurance business they should settle down with; either life underwriting or non-life underwriting, meaning that after five years, composite business would cease to exist.

The commission emphasised that everything is based on Risk-Based Capital (RBC) framework for both insurance and reinsurance companies in Nigeria.

According to the commission, in line with the provisions of the Act, the new MCR takes effect from the date of Presidential assent, and all operators are required to comply fully within a twelvemonths period from the effective date, this means that insurers have from now till July 30th 2026 to comply. 

Operators’ views

Meanwhile, NAICOM’s decision has received comments from operators most of who said they have been waiting for it to come.

The Managing Director and Chief Executive Officer, Enterprise Life Insurance, Mr Nelson Akerele, it is a welcome news adding, “It is what most practitioners have been looking forward to.It is not as if operators think it is not going to happen.”

Akerele, said it was not news because a lot of efforts have been made in the past to push recapitalisation in the industry but to no avail.

Speaking on the efforts made to ensure the success of the new law, Akerele noted that NAICOM was a respecter of the law in all reckoning. This, according to him, was why it joined efforts with the law makers to come up with a successful Act that can now address the problems of the industry.

“They were able to take the back step do the necessary things, went through the act, Senate pushed it on; did the real work; likewise, the House of Reps. Now what this current NIIRA Act has done is to consolidate all the various Acts scattered all over: the motor Third Party insurance Act, Public liability all scattered but what they have done is to put them under one umbrella where all the laws are consolidated as one,” he said.

” They now pushed up the capital base from N2 billion to N10 billion for life business, N3 billion to N15 billion for general business N25 billion for composite and N35 billion for reinsurance and gave five-year moratorium for composite firms to decide to do life or general,” he stated

Akerele said the recapitalisation is overdue but has come at a good time after all loopholes through which its implementation would be punctured have been blocked. He was optimistic that this time the recapitalisation exercise would succeed.

In her reaction, the immediate past Director General, African Insurance Organisation(AIO) and former Managing Director NICON Insurance Corporation, Ms Priscilla Soares, commended NAICOM for pushing it through.

She observed that the industry was in a very challenging situation right now and a lot needed to be done to ensure its survival.  

She noted that it may be painful but people have to take the bull by the horns and work together for the future of the industry to be bright.

She said with the new Act, companies   needed to determine the line of business they could do. 

She added that the days of doing all insurance businesses were over, as the law now makes each firm to concentrate on one area where its capital could carry it.

She further noted that there would be improvement in terms of recapitalisation, adding that there won’t be many casualties because companies would, going by the law this time, concentrate on the type of business their financial strength could carry.

“We all saw it coming and we are into it now. at the end, the industry will be much better for it,” she assured.

Insurance sector analysts however said the minimum capital recommendation was very low, adding that given the level of inflation and enormous capital flight occurring in the industry as a result of insuring abroad by insurance and reinsurance firms, higher capital should have been recommended.

But industry observers said the most important thing is that the industry after 18 years of several unsuccessful attempts to upgrade minimum capital of operators, may this time succeeded in achieving that as anyone who wants to oppose the current exercise as they did in the past would  first of all amend the law before he can succeed.

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