A well-capitalised insurance sector is critical to economic growth. Last week, the National Insurance Commission (NAICOM) directed all insurance companies in Nigeria to recapitalise by July 2026, warning that failure to comply could result in sanctions, including liquidation or forced mergers. This directive aligns with the Nigerian Insurance Industry Reform Act 2025, which raises minimum capital requirements to ₦10 billion for life insurers, ₦15 billion for non-life firms, and ₦35 billion for reinsurance companies.
Under Section 9(4) of the Insurance Act, 2003, NAICOM is empowered to revise capital thresholds as needed. The last exercise in 2020 saw sharp increases: life insurers from ₦2 billion to ₦8 billion, non-life from ₦3 billion to ₦10 billion, and composite insurers from ₦5 billion to ₦18 billion. Reinsurance firms were also required to raise their capital by 200%.
The commission argues that higher capitalisation will enable insurers to adopt digital technologies, expand market penetration, and strengthen their ability to manage risks. Currently, Nigeria lags behind South Africa, Kenya, and Ghana in insurance penetration despite rising asset values, liabilities, and operating costs. Analysts expect the new requirements to trigger mergers and acquisitions, similar to the consolidation that transformed the banking sector.
According to the 2025 Insurance Industry Report by Agusto & Co., industry revenue surpassed ₦1 trillion in 2024, driven by aggressive marketing and inflation-adjusted premiums. The report recommended stricter enforcement of compulsory insurance, improved product distribution, and larger capital buffers. It also projected that increased government spending on infrastructure will boost underwriting opportunities.
Despite the growth, many Nigerian insurers remain undercapitalised, limiting their capacity to cover high-value risks in critical sectors such as oil and gas, marine, and aviation. A stronger capital base would allow local firms to retain more business and reduce reliance on foreign reinsurers.
With 11 months left to comply, insurers are expected to explore private equity investments, mergers, and acquisitions. The recapitalisation drive should ultimately produce fewer but stronger companies, better positioned to take on large, profitable risks and integrate more competitively into the global financial system.
