The House of Representatives has passed the Nigeria Insurance Industry Reform Act, 2024, which aims to establish a robust legal and regulatory framework to protect the interests of policyholders across the country.
This new bill introduces significant changes to the insurance sector, including the recognition of two primary classes of insurance—life and non-life insurance—and increases the minimum capital requirements for different insurance categories.
Earlier in December, the Nigerian Senate had already passed a bill that raised the capital requirements for insurance companies.
Under the new law, non-life insurance businesses must meet a minimum of N25 billion in capital, life insurance businesses N15 billion, and reinsurance businesses N45 billion.
Additionally, the bill introduces a N25 million penalty for individuals found operating unlicensed insurance businesses in Nigeria.
The Act also repeals several outdated laws, including the Insurance Act, Cap 117; the Marine Insurance Act, Cap M3; the Motor Vehicle (Third Party) Insurance Act, Cap M22; the National Insurance Corporation of Nigeria Act; and the Nigerian Insurance Reinsurance Corporation Act, Cap N131, which were part of the Laws of the Federation of Nigeria, 2004.
The passage of the bill followed a thorough review by lawmakers, led by House Leader Prof. Julius Ihonvbere, during the Wednesday plenary session.
The House carefully examined the provisions of the bill, agreeing with the Senate’s version and signalling the bill’s final passage into law.
The primary goal of the new Act is to regulate the insurance industry, foster sector development, and safeguard the interests of policyholders and other stakeholders.
The Act also lays out clear guidelines for who can conduct insurance business in Nigeria, requiring operators, directors, and management to meet specific suitability criteria.
According to Part III of the Act, “A person shall not commence or carry out insurance, reinsurance, or related business in Nigeria unless licensed by the commission as an insurer or a reinsurer under this bill.” It also specifies the requirements for licensing applications, which must be submitted to the commission with the relevant documentation.
The bill further stipulates that insurance operating licenses may be cancelled if a company fails to adhere to sound insurance practices, does not meet the required capital or solvency standards, or ceases to conduct business for at least one year.
Section 15 of the bill outlines minimum capital requirements for different sectors of the insurance industry: N15 billion or risk-based capital for non-life insurance businesses, N10 billion or risk-based capital for life assurance businesses, and N35 billion or risk-based capital for reinsurance businesses.
The commission will assess various risks, including insurance, market, credit, and operational risks, when determining the risk-based capital needed.
Section 16 requires new insurers to deposit 50% of the minimum capital with the Central Bank of Nigeria upon registering their business. After registration, 80% of this statutory deposit will be refunded with interest within 60 days. Existing companies are required to deposit 10% of the minimum capital with the Central Bank.
This new insurance law represents a significant step towards enhancing the regulatory environment of Nigeria’s insurance industry, which aims to foster growth, increase competitiveness, and better protect policyholders.
