As Nigeria’s insurance industry welcomes the passage of the Nigeria Insurance Industry Reform Act (NIIRA) 2024, industry stakeholders are voicing both optimism and caution. While the law is expected to strengthen policyholder protection and modernise regulation, some operators warn that its implementation will place significant financial and operational burdens on insurers — especially smaller players.
Speaking on the new law, a senior industry figure noted that while NIIRA offers strong benefits for policyholders, including stricter claim settlement timelines and the establishment of a fund to pay claims if an insurer becomes insolvent, the reforms will challenge operators’ capacity.
“The excitement should go more to policyholders,” he said. “For operators, especially the smaller ones, this is going to be a big burden. Injecting new capital is not something to celebrate; it’s a challenge.”
Capital Hike and Risk-Based Transition Pose Hurdles
The Act’s transition to risk-based capital requirements is expected to reshape the industry. Under this model, companies must maintain capital levels based on the specific risks they underwrite. While this aligns Nigeria with global best practices, it could force smaller firms into costly fundraising rounds in a market with historically modest insurance returns.
Industry watchers also question whether all segments — including microinsurance and Takaful operators — will face the same capital thresholds as mainstream insurers. If treated equally under risk-based capitalisation, smaller niche players may be forced to consolidate or exit the market.
“Risk-based capitalisation means the regulator determines the capital per class,” the expert explained. “If everyone is treated equally, then the distinction between microinsurance and conventional insurers disappears, and that will create more challenges for the industry.”
Regulators Gain New Enforcement Powers
The NIIRA also strengthens the National Insurance Commission’s (NAICOM) enforcement authority. Under the old law, regulators often struggled to sanction non-compliant companies. The new framework allows for fines, prosecution, and direct sanctions against erring operators, giving NAICOM “the teeth to bite.”
However, effective enforcement will depend on capacity. The expert questioned whether Nigeria has enough qualified actuaries to support a full industry shift to risk-based supervision, warning that this gap could slow implementation.
Industry Consolidation Likely
Currently, Nigeria has 67 registered insurance companies, excluding microinsurance and Takaful providers. With higher capital requirements and stricter supervision, the number of operators is expected to shrink.
“Definitely, there will be a reduction in operators,” the source said. “How it will happen, I don’t know, but some will not survive the transition.”
Implementation and Compliance Concerns
While compulsory insurance provisions have been expanded under the Act, stakeholders remain sceptical about enforcement. Citing Ghana’s example where government agencies were penalised for non-compliance, the expert questioned whether Nigeria’s regulatory and political environment would support such strict measures.
He also warned against premature celebration within the industry.
“Let’s not get carried away. There are still many unanswered questions, and many operational and structural issues that must be addressed before we see the true benefits of this reform.”
As the industry awaits NAICOM’s final implementation guidelines, operators are bracing for a period of adjustment that could reshape Nigeria’s insurance landscape for years to come.
