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Introduction
In 2025, Nigeria introduced two significant Statutes that collectively reshape Nigeria's insurance industry. The first is the Nigerian Insurance Industry Reform Act, 2025 ("NIIRA" or the "New Act"). Upon its enactment, the NIIRA repealed the Insurance Act 2003 (the "Old Act"), the Marine Insurance Act 1961, the Motor Vehicle (Third Party Insurance) Act 1945, the National Insurance Corporation of Nigeria Act 1969, and the Nigeria Reinsurance Corporation Act 1977. In their place, the NIIRA establishes a single, consolidated legal framework governing the licensing, regulation, operation, and supervision of all classes of insurance business in Nigeria. The second legislation is the National Insurance Commission's Guidelines for Insurtech Operations (the "Guidelines"). Shortly before the enactment of the NIIRA, the Guidelines were released by the National Insurance Commission ("NAICOM"), the regulator of the insurance industry in Nigeria. The Guidelines establish the regulatory framework for insurance technology ("Insurtech") companies operating in Nigeria.
Together, these reforms signal Nigeria's intention to modernize the insurance sector and strengthen consumer protection, transparency and enhance risk management. They are also widely viewed as part of broader economic reforms aimed at expanding financial sector participation and supporting Nigeria's ambition of achieving a US$1 trillion GDP economy by 2030. Among the changes introduced, three are particularly compelling. The NIIRA replaces the Old Act's formula-based solvency model with a risk-based capital regime, requiring insurers to hold capital that reflects their actual risk exposure rather than a fixed percentage of premium income. The New Act also introduces enforceable timelines for claims settlement, supported by financial penalties and interest for non-compliance, directly addressing a longstanding concern of Nigerian policyholders. Additionally, the Guidelines provide, for the first time, a formal licensing and compliance framework for insurtech operations, replacing what had previously been an uncertain regulatory environment. Taken together, these changes represent a meaningful shift toward a more accountable and digitally prepared insurance sector.
This article highlights the key implications of the NIIRA and the Guidelines, focusing on the obligations of legacy insurers, the regulatory framework for insurtech companies, and the enhanced protections now available to insured persons.
What Legacy Insurers Should Know
a. Higher Capital Requirements
One of the major changes introduced by the NIIRA is the increase in minimum capital requirements for insurers operating in Nigeria. Under the New Act, no insurer may operate in Nigeria unless it maintains the higher of (a) the risk-based capital prescribed by NAICOM or (b) the statutory minimum capital threshold applicable to its class of insurance business.
The statutory thresholds are ₦15 billion for non-life insurance business, ₦10 billion for life assurance business, and ₦35 billion for reinsurance business. 1 For new insurance companies, this minimum capital may be held in the form of government bonds, treasury bills, cash, or cash equivalents. 2 For existing (legacy) insurers, the minimum capital must consist of either (a) the excess of admissible assets over liabilities (after deducting the value of shares held by the company), (b) subordinated liabilities approved by NAICOM, or (c) any other financial instruments as may be prescribed by NAICOM. 3 Legacy insurers must comply with these capital requirements within twelve (12) months from the date of commencement of the New Act being July 31, 2025. 4 Failure to comply may result in regulatory sanctions, including the cancellation of the insurer's licence. 5
b. Risk-Based Capital and the Shift from Formula-Based Solvency
Under the Old Act, insurers were required to maintain a solvency margin calculated primarily as not less than fifteen (15) per cent of gross premium income or minimum paid-up capital, whichever was higher.6 This approach had notable limitations. It measured solvency based on premium volume, rather than the actual risk profile of an insurer's portfolio. As a result, insurers with very different risk exposures could be held to the same capital requirements.
The NIIRA changes this by introducing a risk-based regime (under sections 24 to 26) requiring insurers to maintain capital that reflects their actual risk exposure, covering insurance risk, market risk, credit risk, and operational risk. In doing so, the New Act introduces the concept of a "capital charge," defined under section 26(2) as the amount of capital an insurer must set aside to absorb potential losses on its assets or unexpected increases in its liabilities. In practical terms, the riskier an insurer's assets or obligations, the higher the capital charge applied to them. NAICOM retains the discretion to prescribe higher or lower capital requirements for any class of insurance business, and may also require a specific insurer to hold additional capital where it considers that insurer's particular risk profile to warrant it.7
The insurers must also maintain a capital adequacy ratio of at least 100 per cent at all times. The implication of this is that insurers with higher risk portfolios must maintain more capital, while those with safer or lower risk portfolios may operate with relatively less capital, provided they remain with regulatory thresholds. In addition, the New Act empowers NAICOM to suspend or cancel the licence of any insurer that fails to maintain the prescribed capital or solvency requirements. 8
c. Tougher Sanctions for Delayed Delivery of Policy Documents
The NIIRA also significantly strengthens the legal consequences of failing to deliver policy documents to insured persons. Under section 15 of the Old Act, insurers were required to deliver the policy document to the insured within sixty (60) days after payment of the first premium. Non-compliance attracted only a fine of ₦5,000 upon conviction, a sanction that was widely considered ineffective.
The NIIRA adopts a much stricter approach. Under section 17, insurers must now deliver policy documents on or before the commencement of the policy. If an insurer fails to do so, it may be fined up to 5% of the premium received, in addition to any other sanctions imposed by NAICOM. More importantly, an insurer cannot rely on any exclusion, condition, or warranty in the policy to deny liability, unless it can demonstrate that the loss occurred before the document was delivered. The current regime, therefore, offers stronger and more practical protection to policyholders.
d. Product Approval and Regulatory Efficiency
The NIIRA also addresses product innovation and regulatory responsiveness. Under the New Act, insurers must obtain prior approval from NAICOM before introducing any new insurance product. 9 NAICOM is required to communicate its decision within thirty (30) days of receiving a complete application, or within the period specified in its Service Charter. Where NAICOM fails to communicate its decision within this timeframe, the new product is deemed approved.10
While the Old Act also required prior approval, 11 it did not clearly provide for deemed approval and the penalty for non-compliance was only ₦10,000 upon conviction. 12 The NIIRA has improved this process by introducing the deemed approval mechanism, which reduces regulatory delays, and imposing a much higher penalty of ₦500,000 for each day a product is used without approval.
e. Licensing of Insurance Intermediaries
The NIIRA establishes a uniform licensing framework for all insurance intermediaries. Under the NIIRA, all insurance intermediaries, including insurance agents, insurance brokers (including reinsurance brokers), and loss adjusters, must obtain NAICOM licences before conducting business in Nigeria.13
This requirement is not entirely new, as under the Old Act, agents were licensed, while brokers and loss adjusters were merely registered with NAICOM.14 The NIIRA consolidates these three categories into a single, uniform licensing regime.
The New Act also introduces tougher penalties for insurers that deal with unlicensed intermediaries. For example, dealing with an unlicensed agent attracts a penalty equal to five times the premium collected. 15 An insurer that knowingly or recklessly transacts business with an unlicensed broker, or pays commission to a broker whose licence has expired, is liable to a penalty equal to the full commission due on the business transacted.16 Where an insurer persists in transacting business with a suspended broker, NAICOM may cancel the insurer's own licence.17 An insurer that engages an unlicensed loss adjuster similarly faces a penalty of ten times the fees charged for the services rendered.18
f. Creation of Insurance Policyholder Protection Fund
NIIRA establishes the Insurance Policyholder Protection Fund (the "Fund") to provide a financial safety net where an insurer becomes distressed or insolvent. The Fund is financed through annual contributions of 0.25% of the gross premium income of insurers and reinsurers (with a matching contribution from the Security and Insurance Development Fund). Additional contributions may be required from insurers if necessary. Failure to contribute may result in regulatory sanctions, including the cancellation of the insurer's licence. The purpose of the Fund is to settle claims that cannot be paid because an insurer has become insolvent or has had its licence revoked. The Fund is managed and administered independent of the funds of NAICOM by a competent fund manager appointed by NAICOM and the Fund shall not be co-mingled with the funds of NAICOM and shall only be in licensed deposit money banks or other recognized financial institutions as may be prescribed by NAICOM to ensure accountability and transparency. 19
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Footnotes
1. NIIRA, section 15(1).
2. NIIRA, section 15(4).
3. NIIRA, section 15(5).
4. NIIRA, section 15(6).
5. NIIRA, section 8(1)(b).
6. Old Act, section 24(1) and (2).
7. NIIRA, sections 26(4) and 26(5).
8. NIIRA, section 8.
9. NIIRA, section 18(1).
10. NIIRA, section 18(2).
11. Old Act, section 16.
12. This is also a one-off payment.
13. NIIRA, sections 37(1), 39(1), 40(1), 48(1).
14. Old Act, sections 34(1)(b), 36(1), 45(1).
15. NIIRA, section 37(9).
16. NIIRA, section 39(10)
17. NIIRA, section 45.
18. NIIRA, section 48(5).
19. NIIRA, section 212.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
