...Only 25 Firms Show Progress
As Nigeria’s insurance industry races against time to meet a sweeping new capital requirement, signs are emerging that many operators may struggle to survive the regulatory reset, with only 25 of more than 58 licensed insurers reportedly moving to verify their capital position ahead of the July 31 deadline set by the National Insurance Commission (NAICOM).
The development has intensified anxiety across the sector, where fears of job losses, forced mergers, and possible licence withdrawals are beginning to overshadow reform optimism.
With barely weeks left, the recapitalisation exercise is widely viewed as a defining test for the structure and survival of the industry.
Low compliance raises industry-wide alarm
Despite months of preparation time, only a minority of operators have submitted applications to appointed auditors for capital verification, a critical step required for compliance.
At least eight firms have turned to the capital market in a bid to raise fresh funds, while a few others are exploring private investment channels amid growing financial pressure.
However, the broader industry response remains sluggish, exposing what stakeholders describe as long-standing structural weaknesses in governance, reporting standards, and market confidence.
One major concern is the sector’s persistently low penetration rate, estimated at below one per cent, which has limited investor appetite and weakened public trust.
NAICOM holds firm as pressure mounts
Despite widespread expectations of a possible extension, NAICOM has maintained a firm position that the deadline remains unchanged.
Insiders say the regulator is determined to enforce compliance strictly, even as operators continue to lobby for additional time.
Multiple industry sources told The Guardian that NAICOM is focused on ensuring full implementation of the new capital thresholds, insisting that only firms with verified and admissible capital will be allowed to continue operating beyond the deadline.
At the EY Insurance Summit in Lagos, the Deputy Commissioner for Insurance (Finance and Administration), Usman Jankara, reinforced this stance, warning operators that survival would depend strictly on compliance.
“Persistent challenges, including complex merger-and-acquisition processes, macroeconomic volatility affecting capital raising and capacity gaps in underwriting and risk management,” he said.
He added that mere expressions of interest would not be sufficient to guarantee licence retention.
A trillion-naira capital gap and rising consolidation pressure
Industry estimates suggest insurers collectively need nearly N1 trillion in fresh capital to meet the new thresholds under the Nigerian Insurance Industry Reform Act (NIIRA) 2025.
The revised requirements significantly raise the bar:
- Life insurers: ₦10 billion (up from ₦2 billion)
- Non-life insurers: ₦15 billion (up from ₦3 billion)
- Composite insurers: ₦25 billion
- Reinsurers: ₦35 billion
The scale of the capital demand is being compared to the banking sector recapitalisation, which raised about ₦4.65 trillion, though banks were granted a longer compliance window of 24 months, while insurers have just one year.
Already, three operators have signalled partial readiness, including deposits of 10 per cent of required capital into the Central Bank of Nigeria-managed Policyholders’ Protection Fund, as mandated by NAICOM.
Still, many firms remain far from meeting the requirements.
Mergers, acquisitions and survival battles
Behind the scenes, most insurers are now weighing mergers and acquisitions as a survival strategy.
However, negotiations are reportedly slow and complex, with several talks stalled due to valuation disputes, governance concerns, and funding uncertainties.
Some companies are in discussions with pension fund managers, asset managers, and high-net-worth investors both locally and internationally, including potential partners from Europe, South Africa, and the Middle East.
But these deals are proving difficult to conclude, particularly due to regulatory uncertainties and concerns over capital repatriation.
Market stress begins to show
The recapitalisation pressure is already affecting investor sentiment.
While the broader Nigerian stock market has posted strong gains—about 49 per cent year-to-date growth in the All-Share Index (ASI)—the insurance sector has moved in the opposite direction.
The insurance index has declined by 1.75 per cent, making it the only negative sector index so far this year.
This marks a sharp reversal from 2024, when the sector recorded strong gains following the passage of the reform law.
Concerns over governance and structural weakness
Beyond capital constraints, analysts say deeper structural issues continue to weigh on the sector.
Long-standing weaknesses in underwriting discipline, delayed financial reporting, weak corporate governance, and poor claims management practices remain unresolved in several firms.
Stakeholders argue that recapitalisation alone will not fix these problems.
An insurance consultant, Akinwale Ogundele, warned that reforms must go beyond capital thresholds.
He urged regulators to ensure that “the cost of recapitalisation was not transferred to consumers through higher premiums.”
Similarly, the President of the Progressive Shareholders Association, Boniface Okezie, stressed that macroeconomic conditions could hinder fundraising efforts, calling for more time for operators to comply.
Industry bodies split between optimism and concern
The Nigerian Insurers Association (NIA) has publicly supported the recapitalisation exercise, describing it as a necessary step toward strengthening the sector.
The association’s Director-General, Bola Odukale, insisted that the reform would not necessarily lead to mass exits.
She argued that weaker firms could merge rather than disappear, adding that stronger capital bases would improve underwriting capacity, claims payment, and digital innovation.
However, shareholder groups and consumer advocates remain cautious, warning that poor execution could destabilise the industry.
Sunny Nwosu of the Independent Shareholders Association of Nigeria (ISAN) argued that government participation is key to restoring public confidence, particularly through increased insurance coverage of public assets.
“If the government leads by example and fully embraces insurance, it will encourage Nigerians to do the same,” he said.
A turning point for the sector
Despite the uncertainty, some experts view the reform as necessary for long-term stability.
A senior insurance consultant described the moment as a potential reset, arguing that a leaner but better-capitalised industry could improve risk retention, strengthen claims capacity, and expand market reach.
Still, concerns remain that without adequate support mechanisms and realistic timelines, the reform could trigger consolidation shocks, job losses, and short-term instability.
For now, attention remains fixed on July 31, a date that may determine not just compliance, but the future structure of Nigeria’s insurance industry.