Insurance companies in Nigeria brace up for hurdles they must overcome to meet recapitalisation deadline
By Saka Olalekan
Nigeria’s insurance industry has struggled for impact, recognition and contribution to the nation’s gross domestic product (GDP) for too long. The once strong capital base on which insurance companies operated has long been weakened by inflation, naira devaluation, huge jump in asset replacement value, social and economic standard shifts, among others, thus making operators slaves of foreign insurers, especially in big ticket risk businesses.
In the past, precisely, three times in 2013, 2018 and 2021, when recapitalisation exercise was initiated, operations of insurance companies were hampered by several issues, including litigation, mostly from shareholders. It has taken the wisdom of the initiators of the Nigerian Insurance Industry Reform Act (NIIRA) 2025 to infuse capitalisation into it, to keep at bay potential complainants who were probably lurking around to head to court once such an idea was mooted.
The date, July 31, 2025, would therefore be remembered as the day President Bola Tinubu signed into law the long-awaited consolidated insurance bill after three abortive attempts, from 2013 when the journey of getting a new act began. Before then, the industry was operating with the Insurance Act of 2003.
Recapitalisation Under NIIRA 2025
In the new dispensation, insurance companies are expected to undergo a fresh recapitalisation exercise that would ensure they shore up their capital base to N10 billion and N15 billion, for life and non-life businesses, respectively. The law repeals and consolidates several outdated insurance laws into a single, modern legal framework. The new law also sets new capital thresholds, which require life insurance firms to increase their capital from N2 billion to N10 billion; non-life insurance, from N3 billion to N15 billion and reinsurance companies, from N10 billion to N35 billion, translating to about 500 per cent capital raise.
Section 15 of the Act states, inter alia: (1) A person shall not carry on insurance business in Nigeria unless the insurer has and maintains the minimum capital, in the case of (a) non-life insurance business, the higher of (i) N15,000,000,000.00 or (ii) risk-based capital determined by the commission; (b) life assurance business, the higher of (i) N10,000,000,000.00 or (ii) risk-based capital determined by the Commission and (c) reinsurance business, the higher of (i) N35,000,000,000.00 and (ii) risk-based capital determined by the commission.”
The National Insurance Commission (NAICOM) has, through a circular dated August 12, 2025 and signed by Dr. Usman Jankara, Deputy Commissioner for Insurance, notified all insurance and reinsurance companies that the recapitalisation exercise commenced on July 31, 2025, the day the bill was signed into law. It explained that, “the NIIRA 2025 introduces higher Minimum Capital Requirements (MCR) of N10billion, N15billion, N25billion and N35billion for life, non-life, composite and reinsurance companies, respectively, and a shift to a Risk-Based Capital (RBC) framework for insurance and reinsurance companies in Nigeria.”
The circular said, “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 twelve (12) month period from the effective date. All insurers and reinsurers shall comply with the requirements on or before July 30, 2026.”
Meanwhile, NAICOM has constituted a 2025 Recapitalisation Committee chaired by Mrs. Oluwatoyin Charle, Director of Supervision, to oversee the implementation of the recapitalisation programme. The committee’s responsibilities include ensuring compliance by insurance companies with revised capital requirements and promotion of transparency and integrity in sourcing and verifying capital inflows.
Olusegun Ayo Omosehin, Commissioner for Insurance, urged the 11-member committee to approach its task with professionalism, diligence and commitment to the common interest, assuring it of necessary support
Will recapitalisation alone bail out the sector?
Insurance stakeholders have described the exercise as futile if underwriting firms fail to imbibe corporate governance that would ensure they make judicious use of the money in their kitty, post-recapitalisation. Experts who spoke at the 2025 annual retreat of the Risk, Audit and Compliance Committee (RAAC) of NAICOM in Abeokuta, Ogun State recently, said most recapitalised insurers would die if corporate governance was lacking in the day-to-day running of affairs of such entities.
Mrs. Bola Odukale, Director General, Nigerian Insurers Association (NIA), in a paper titled, “Insurance Industry Recapitalisation: Strengthening Governance Activities for Maximum Benefits,” said while there was need to build capital resilience, embedding strong governance structures that deliver long-term value was equally critical. “At the heart of this transformation is recapitalisation, an essential step toward achieving financial solidity, institutional resilience and global competitiveness,” she said. “However, let us be clear: capital alone is not a guarantee of success. The strength of our governance structures will ultimately determine how well we deploy capital, manage risks and meet our obligations to policyholders and stakeholders alike.”
While recapitalisation must go together with robust governance, Odukale said, strong boards, efficient internal controls, transparent audit systems and effective compliance processes are all indispensable components of a resilient institution. She said her group remained committed to facilitating regulatory dialogue to ensure that recapitalisation timelines and modalities remain realistic and inclusive; promoting capacity-building initiatives in risk, audit and compliance functions across member companies and encouraging widespread adoption of digital tools for governance, transparency and performance monitoring.
Stephen Alangbo, Managing Director and Chief Executive Officer, Cornerstone Insurance Plc, said what led to the closure of some big insurance companies in the past was breakdown of corporate governance, especially after the 2007 recapitalisation exercise in which companies raised much money but did not know what to do with it. He urged underwriters not to tread the same path in the ongoing exercise, while advising them to embrace corporate governance to make insurer attractive for investments, from both local and foreign investors.
A New Dawn?
Olugbenga Akinlalu, chairman of RAAC, said recapitalisation presents both a challenge and an opportunity, as it is a clarion call for the committee members, as assurance professionals, to rise to the occasion, sharpen their tools and position themselves as catalysts for governance excellence.
Olusegun Ayo Omosehin, Commissioner for Insurance, emphasised the critical role of recapitalisation in stabilising the industry and contributing to Nigeria’s $1 trillion economy target.
Mrs. Oluwatoyin Charles, Director of Supervision, NAICOM, said the commission was positioning the industry to contribute more meaningfully to national economic development. “Recapitalisation is just one aspect of the NIIRA Act,” she said. “With sufficient capital, we can ensure financial stability and attract foreign investment. Strong corporate governance is essential to achieving these goals.”
Kunle Ahmed, chairman of NIA, expressed appreciation to Tinubu for assenting to the bill for the new act, describing it as a pivotal legislation that sets the stage for transformative progress across the insurance ecosystem and the broader financial services landscape. Ahmed who is also the Managing Director and Chief Executive Officer of AXA Mansard Insurance Plc, said operators would continue to engage and dialogue with regulators to ensure a smooth exercise.
Speaking on the new law, Prince Babatunde Oguntade, President of the Nigerian Council of Registered Insurance Brokers (NCRIB), said it would unlock the huge potential of the insurance industry in the country. He expects the law to make insurance companies stronger through recapitalisation that would usher in more expertise and funding needed for the industry to compete favourably in the global market, while making them competitive in risk businesses, such that some risks that are ceded abroad due to low capacity could be retained locally.
Dr. Jeff Duru, Managing Director and Chief Executive Officer of Universal Insurance Plc, said NIIRA would ensure underwriters recapitalise their businesses, and encouraged mergers and acquisitions that would ensure companies are financially sound to carry on their civic duties and responsibilities, as expected of them. This development, according to him, would allow foreign investors to come into the country to acquire critical stakes, thereby strengthening the industry to compete globally, especially for big ticket risk businesses in oil and gas, maritime and aviation sectors, among others. He expects companies to approach the public to raise fund for recapitalisation soon, in order to meet the July 30, 2026 deadline.
Most of the big underwriting firms in the country had earlier done self recapitalisation and actually exceeded the minimum threshold. The challenge, however, is whether or not the capital they have is enough, compared with their risk appetite in an RBC regime which the regulator is adopting in the ongoing exercise.
Some industry practitioners are optimistic that the exercise may produce specialised insurers by virtue of the capital they carry, which would be good for the industry. However, there appears to be confusion in the industry regarding what is accepted as capital in the ongoing exercise, a puzzle they expect the regulator to resolve in the months ahead, before expiration of the deadline.
