Nigerians with insurance policies can now breathe a sigh of relief as the National Insurance Commission (NAICOM) has introduced the Policyholders’ Protection Fund, a new safety mechanism designed to protect customers against losses in the event of insurer insolvency.
For years, many Nigerians have harbored fears of losing their insurance investments following the collapse of several insurance firms. These concerns are not unfounded—some companies have folded, leaving policyholders stranded and shaking confidence in the industry. One recent case is African Alliance Insurance Plc (AAI), one of Nigeria’s oldest life insurers, which was placed under interim management by NAICOM after years of financial instability.
NAICOM Intervenes in African Alliance
On October 30, 2024, NAICOM dissolved the board and management of African Alliance Insurance, citing prolonged financial distress and a failure to meet obligations to policyholders and annuitants. Following a comprehensive review of its finances, governance, and operations, the Commission found that the insurer’s weaknesses threatened its long-term sustainability.
To stabilize the company, NAICOM appointed Dr. Haruna Mustapha as Chairman and Mr. Jacob Erhabor as Managing Director/CEO, along with new executive and non-executive directors.
Speaking at a media seminar in Ogun State, the Commissioner for Insurance, Mr. Olusegun Ayo Omosehin, confirmed that NAICOM had cleared all outstanding debts owed to annuitants of African Alliance.
“The Commission has paid all outstanding debts to annuitants of African Alliance to date. No kobo is owed to any customer of the company,” Omosehin stated.
He explained that the intervention was part of NAICOM’s broader effort to protect policyholders, stabilize the market, and restore confidence in Nigeria’s insurance industry.
Introducing the Policyholders’ Protection Fund
Omosehin also announced a major provision in the new Nigerian Insurance Industry Act (NIIRA) 2025—the establishment of the Policyholders’ Protection Fund under Section 212.
The Fund is designed to provide financial protection for policyholders by ensuring that valid claims are paid even if an insurer or reinsurer becomes insolvent or loses its license. It will be financed through a 0.25% contribution from insurers and reinsurers’ gross premium income, matched by another 0.25% from the Security and Insurance Development Fund.
“With this Fund, potential and existing policyholders can rest assured that their investments are safe,” Omosehin said, assuring Nigerians that the days of losing money to failed insurers are over.
He emphasized that while the Fund serves as a safety net, NAICOM remains committed to preventing insolvency before it occurs by enforcing stronger compliance and corporate governance standards across the industry.
Restoring Trust and Stability
Omosehin pledged to work closely with all stakeholders—policyholders, annuitants, employees, and investors—to ensure transparency and maintain public trust.
He reiterated that timely claims payment is central to rebuilding confidence in the insurance sector. “Payment of genuine claims remains sacrosanct to this administration,” he said.
Nigerians React
The introduction of the Fund has been met with mixed reactions among policyholders.
A Lagos-based property entrepreneur, Mr. Sunday Okwute, hailed the initiative as long overdue, comparing it to the protection bank depositors enjoy under the Nigeria Deposit Insurance Corporation (NDIC).
“If NDIC can protect depositors, insurance policyholders deserve similar protection. The Fund is a welcome development, but it must be implemented, not just written on paper,” he said.
Another policyholder, Mr. Ahmed Lukeman, a businessman from Ibadan, expressed cautious optimism. While he welcomed the Fund, he urged NAICOM and insurers to operate with transparency and accountability, warning that public mistrust in the industry remains high.
“The Fund has rekindled some confidence, but NAICOM and operators must act openly and promptly. Nigerians need assurance that their money is truly protected,” Lukeman said.
A Step Toward Renewed Confidence
Industry observers view the Policyholders’ Protection Fund as a turning point for Nigeria’s insurance landscape. By providing a safety net for consumers and enforcing stricter financial oversight, NAICOM aims to rebuild trust, encourage participation, and strengthen the stability of the sector.
