The National Insurance Commission (NAICOM) has cautioned Nigerian insurance companies against relying solely on recapitalisation to secure their financial future, warning that weak corporate governance, poor risk management and imprudent investment decisions could still expose them to financial failure.
The Commissioner for Insurance and Chief Executive of NAICOM, Olusegun Ayo Omosehin, said meeting the industry’s new capital requirements was only the beginning of a more demanding phase in which insurers must demonstrate their capacity to protect shareholders’ funds, manage risks and meet obligations to policyholders.
He stressed that the financial strength of an insurance company should no longer be judged mainly by the amount of capital it raises, but by how effectively its management and board deploy, invest and safeguard those resources against financial and operational risks.
Omosehin spoke in Lagos on Thursday at the eighth Annual Insurance Directors’ Conference, organised by the College of Insurance and Financial Management in collaboration with NAICOM. The conference was held under the theme, “Recapitalisation to Resilience: Leading the Risk-Based Capital Era.”
According to the commissioner, the industry must move beyond complying with minimum capital requirements and focus on building resilient institutions capable of withstanding economic shocks, technological disruptions and emerging business risks.
“Recapitalisation was never the destination; it is the gateway to a more demanding phase — a phase that will be defined not by the size of capital alone, but by how that capital is governed, protected, deployed and aligned with risk,” he said.
He warned that substantial financial resources could not, on their own, guarantee an insurer’s stability, noting that poor governance structures, ineffective internal controls, unsuitable investments and weak risk management could erode the financial position of even well-capitalised companies.
“A well-capitalised institution is not necessarily a resilient institution,” Omosehin said.
He described resilience as an institution’s ability to identify potential threats, absorb financial shocks, adapt to changing market conditions, recover from disruptions and continue delivering value to customers and other stakeholders.
The NAICOM chief also said the transition to the Risk-Based Capital (RBC) framework would fundamentally change how insurance companies are assessed and supervised.
Under the framework, regulatory attention will extend beyond whether an insurer meets the prescribed capital threshold to whether its capital is adequate for the risks associated with the scale, nature and complexity of its operations.
Omosehin explained that the Minimum Capital Requirement (MCR) represents the minimum capital an insurance company must maintain to operate its licensed business. The RBC framework, however, goes further by evaluating the risks undertaken by each institution and determining the additional capital required to support those exposures.
He noted that an insurer could satisfy the minimum capital requirement and still have insufficient capital to cover the risks arising from its business activities.
The distinction, he said, is central to the new supervisory regime, as insurers with different business models, operational structures and risk exposures cannot be assessed solely on the basis of their minimum capital levels.
The commissioner’s warning places greater responsibility on insurance company boards and management teams to ensure that recapitalisation translates into stronger institutions, sounder risk controls and more reliable protection for policyholders.
