The House of Representatives on Wednesday passed the Nigeria Insurance Industry Reform Act, 2024. The new law establishes a comprehensive legal and regulatory framework for insurance operations in Nigeria.
This Act replaces several outdated laws, including the Insurance Act, Cap 117, Laws of the Federation of Nigeria, 2004, and the Marine Insurance Act, Cap M3, Laws of the Federation of Nigeria, 2004. It also repeals 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.
Lawmakers Approve Final Passage of the Bill
The House reached its decision after reviewing the Senate’s version of the bill. House Leader, Prof. Julius Ihonvbere, presented the bill during the plenary session.
Lawmakers examined each clause and fully aligned with the Senate’s position. This concurrence marked the final passage of the bill, making it an official Act of the National Assembly.
A copy of the bill obtained by FRONTPAGE outlined its primary objective. It aims to regulate and develop the insurance industry, ensuring the protection of policyholders, prospective policyholders, and other stakeholders. The law intends to build a competitive, viable, and innovative insurance sector.
Licensing Conditions for Insurance Businesses
The new law requires insurance businesses to obtain a license before commencing operations.
Part III of the Act states, “No person shall commence or conduct insurance, reinsurance, or related business in Nigeria unless licensed by the commission.”
To obtain a license, an applicant must submit an application in a prescribed format. The commission will also require additional documents and information from time to time.
The law mandates the commission to publish a service charter outlining all available products and services. This charter will also specify the requirements for obtaining insurance licenses.
Grounds for License Cancellation
The Act grants the commission the authority to revoke licenses under certain conditions.
The law states that a license may be cancelled if the insurer fails to conduct business in line with sound insurance principles. It also allows cancellation if the insurer fails to meet capital or solvency requirements or ceases to operate for at least one year.
Minimum Capital Requirements for Insurers and Reinsurers
The Act sets minimum capital requirements for insurance businesses in Nigeria.
According to Section 15, Part IV, insurers must maintain a minimum capital base as follows:
- Non-life insurance: The higher of ₦15 billion or risk-based capital as determined by the commission.
- Life assurance: The higher of ₦10 billion or risk-based capital.
- Reinsurance companies: The higher of ₦35 billion or risk-based capital.
The commission will determine risk-based capital requirements based on insurance risk, market risk, credit risk, and operational risk. It will also apply capital charges on assets and liabilities as necessary.
Capital Deposit Requirements for New and Existing Insurers
The new law requires new insurers to deposit 50% of the minimum capital requirement with the Central Bank of Nigeria (CBN) before commencing operations.
Upon registration, insurers will receive 80% of the statutory deposit back, with interest, within 60 days.
For existing companies, the law mandates a 10% deposit of the minimum capital requirement with the CBN.
The statutory deposit will attract interest at the minimum lending rate set by the CBN on January 1st of each year.
Additionally, the commission may approve investments of statutory deposits in treasury bills or other secured investments guaranteed by the Federal Government.
A Landmark Reform for the Insurance Industry
The Nigeria Insurance Industry Reform Act, 2024, represents a major milestone in the country’s financial sector.
With its strict licensing rules, enhanced capital requirements, and strengthened regulatory oversight, the Act aims to modernize Nigeria’s insurance industry.
By ensuring stability, transparency, and competitiveness, the law seeks to boost investor confidence and protect policyholders, while driving long-term growth and innovation in the sector.
