The recently concluded recapitalisation in the insurance industry came at an opportune time to reposition this critical sector and enable it to play its proper role in the economy. Daily Trust welcomes this development.
The conclusion marked the end of a year-long process that began in August 2025, following a directive by the National Insurance Commission based on reforms introduced by the Insurance Industry Reform Act 2025. The exercise involved raising the minimum capital of insurers significantly, in some cases by as much as five times. For instance, the capital requirement for non-life insurers was raised from N3 billion to N15 billion, while that of life insurers increased from N2 billion to N10 billion. The new Act also raised the minimum capital for reinsurers from N10 billion to N35 billion.
At the end of the exercise, 43 insurance firms met their targets, with eight cases still inconclusive, while more than N300 billion in new capital was injected into the sector. The successful firms included 23 non-life insurers, 10 life insurers, eight composite insurers and two reinsurance firms. Interestingly, there were no mergers recorded during the exercise, an indication that the operators largely chose to meet the new requirements through fresh capital rather than consolidation.
Seen against the role insurance plays in modern economies, the exercise is quite commendable. The determination of the regulators to see it through to a successful conclusion deserves applause. The recapitalisation was designed to raise the capacity of the local insurance sector to bear more of the risks arising from economic activities and to improve its standing in society.
The recapitalisation of the insurance industry, coming after that of the banking system, was a necessary complementary action, given the close relationship between the two sectors. With the local banking system strengthened through fresh capital injection, the economy could be adversely affected without a corresponding increase in the insurance sector’s capacity to provide cover for the expected expansion in economic activities. Nigeria’s dream of building a $1 trillion economy by 2030 would be difficult to realise without a vibrant insurance sector capable of supporting it.
Besides underwriting the risks faced by investors and businesses, insurance is also an important provider of long-term finance. As insurance firms promote the culture of insurance, whether in life or non-life business, they can mobilise funds that the rest of the economy, including banks, can tap into for long-term investment.
For decades, the local insurance sector failed to rise fully to its role in an increasingly complex economy driven by industrial expansion, infrastructure development and commercial activities that require adequate protection.
While the banking sector provides much of the funding that drives the visible and invisible economy, the insurance sector is needed to ensure that the system can withstand the unexpected. Accidents, disasters and other unforeseen events can cripple businesses and even disrupt wider economic activity. Insurance provides an important layer of protection against such shocks.
That ability, however, comes from a reasonably capitalised sector and financially strong individual insurers. From industrial complexes to shipping, aviation, construction and other major commercial activities, insurance provides the protection and resilience needed for economic activity to continue even when disaster strikes.
For decades, Nigeria lacked sufficient local capacity to provide that resilience, and the economy paid a price for it. A weak insurance base meant that the domestic economy could not rely sufficiently on local providers for the cover required by major investors and projects. Consequently, a significant portion of risk underwriting was ceded to foreign reinsurers because local players lacked the financial muscle to undertake such projects. This not only contributed to capital flight but also deprived the country of opportunities to build the expertise needed to grow the local industry.
The insurance sector, perhaps partly because of its low capitalisation, was also associated with a myriad of defects and inefficiencies. There were allegations of malpractices, including the failure of some insurance companies to honour their agreements with policyholders. Often, firms were accused of resorting to unprofessional practices in the settlement of clients’ claims.
This gave the local insurance industry a bad name among many Nigerians, who came to see insurance as an industry that did not always keep faith with its customers. Consequently, many avoided insurance and did not want to have anything to do with it. This contributed to the low penetration and patronage of insurance in Nigeria.
Although this image has been changing over the years, the problem has persisted. This may explain why some insurable risks, including fire and accidents, continue to record low levels of coverage in the country.
With the recapitalisation exercise now virtually completed, the sector must rise to play its role. More than ever, Nigeria needs an insurance industry capable of shouldering the risks of an emerging and expanding economy. Daily Trust encourages both regulators and operators to see the recapitalisation exercise not as the end of a process, but as the beginning of a new era for the industry.