The Nigerian insurance industry

In 2024, the Chairman, Senate Committee on Banking, Insurance & Other Financial Institutions presented an insurance bill to the National Assembly, sparking the resurgence of the much-awaited reforms in the insurance industry. In March 2025, shortly before this paper was published, the House of Representatives passed the Insurance Industry Reform Act of 2024.

The proposed reforms include the provision of compulsory insurance cover, substantial increases in minimum capital requirements aimed at enhancing financial stability, and improving consumer protection. While the objectives outlined in the bill are commendable, the increased capital requirements may pose significant challenges for smaller players, potentially leading to market consolidation and reduced competition. This paper analyses the potential impact of the reforms on market structure, competition, and consumer affordability, while exploring strategies for mitigating the potential negative consequences.

Furthermore, the paper delves into the critical issue of recapitalisation, examining the challenges and opportunities associated with raising the required capital. It considers accessing diverse funding sources, optimising capital allocation, and ensuring efficient capital utilisation. The importance of strategic planning and robust risk management frameworks to successfully navigate the recapitalisation process is emphasised.

Recognising the pivotal role of risk management, the paper explores the significance of the Risk-Based Capital (RBC) regime. It discusses the key principles of an effective RBC framework, including identifying and quantifying key risks, setting appropriate capital levels to absorb potential losses, and continuously monitoring and adjusting capital requirements based on evolving risk profiles. The paper further emphasises the crucial role of Asset-Liability Management (ALM) in ensuring the long-term sustainability of insurance companies. It analyses the challenges and opportunities associated with managing the interplay between assets and liabilities, including mitigating various risks such as interest rate risk, credit risk, and liquidity risk. 

Beyond compliance, IFRS 17 implementation continues to have significant impact on insurers globally. This paper delves into the critical aspect of post-implementation issues of IFRS 17, particularly its interplay with finance transformation, the RBC regime, and ALM.

Finally, the paper considers the evolving sustainability considerations for the Nigerian insurance industry, including the impact of climate change on underwriting, investment portfolios, and operational risks. It also explores how insurers can integrate sustainability principles into their business strategies, including developing sustainable insurance products, investing in climate-resilient infrastructure, and readiness for compliance with IFRS S1 and S2.