The Senate on Tuesday passed a bill seeking to increase the capital base of risk-based insurance companies.
It, nevertheless, reduced the figures proposed in the bill as contained in the report of its Committee on Banking, Insurance and other Financial Institutions chaired by Senator Tokunbo Abiru.
The red chamber, after a thorough consideration of the panel’s report, approved N25 billion for Non-life Assurance; N15 billion for Life Assurance and N35 billion for Reinsurance firms.
The previous provision of the bill before consideration had pegged the minimum capital requirement for non-life insurance business at N25 billion and the life assurance at N15 billion while reinsurance was put at N45 billion.
This came as the National Insurance Commission (NAICOM), the apex industry regulatory body, hailed the bill’s passage, adding that it would unlock the growth, prosperity, and potential of the insurance sector.
In a statement, the commission said the passage marked a significant milestone in the country’s efforts to revamp the industry after nearly two decades.
It described the bill as a game changer for the industry, pointing out that it would boost the sector’s contribution to GDP going forward, and provide a comprehensive framework for regulating all types of insurance businesses among others.
However, the Senate okayed the legislation after the consideration and adoption of the recommendations of the report of a bill for an Act to repeal the Insurance Act, CAP. 127 laws of the Federal Republic, 2004.
Also affected were the Marine Insurance Act, 2004; the National Insurance Corporation of Nigeria Act ,2004 and the Nigeria Reinsurance Corporation Act, 2004.
The Red Chamber enacted the Nigeria Insurance Industry Reform Act, 2024, to provide for a comprehensive legal legal and regulatory framework for insurance business in Nigeria and for related matters.
The decision followed the consideration, amendment and adoption of the panel’s report
The bill before the Senate had proposed that, “A person shall not carry on insurance business in Nigeria unless the insurer has and maintains, while carrying on that business, a minimum capital.”
The report of the panel had read, “In the case of non-life insurance business, the higher of N25,000,000,000.00, or risk-based capital determined from time to time by the Commission.
“In the case of life assurance business, the higher of N15,000,000,000.00, or risk-based capital determined from time to time by the Commission.
“In the case of reinsurance business, the higher of N45,000,000,000.00, and risk-based capital determined from time to time by the Commission.”
The new legislation stated that in determining the risk-based capital required, the Commission shall take into consideration the capital for insurance risk, market risk, credit risk, and operational risk and apply such capital charges on assets and liabilities as shall be determined from time to time.
Part of the proposed law read, “An insurer registered before the commencement of this bill shall comply with the foregoing requirement within 12 months of the commencement of this bill.
“The Commission shall cancel the registration of any insurer or reinsurer that fails to satisfy the provisions of sub-section (2) of this section as it relates to the category of operation of such insurer or reinsurer.
“Not later than 30 days after expiration of the period specified in sub-section (4) of this section, (the commission) shall publish a list of all insurers that have complied with the provisions of this section.
“In determining the risk-based capital required, the Commission shall take into consideration the capital for insurance risk, market risk, credit risk and operational risk; and apply such capital charges on assets and liabilities as shall be determined from time to time.
“The increase in minimum capital from the current capital of N2 billion to N10 billion (life), N3 billion to N15 billion (non-life), and N10 billion to N35 billion (reinsurance), is necessitated by depreciation in the value of the currency.”
The Deputy President of the Senate, Senator Jibrin Barau, commended the panel for a job well done.
He said, “When we have the concurrence by the House of Representatives and the assent of Mr. President, the law will help shape our economy for the better.
“Economies change at all times. It is, therefore, incumbent on the authorities of every nation to recraft their legislation to go in tandem with contemporary realities. And this is what has been done by the passage of this legislation.
“The intent is to restructure the insurance ecosystem to accommodate contemporary happenings within our economy.”
Nonetheless, NAICOM described the bill as a game changer for the industry, pointing out that it would boost the sector’s contribution to GDP going forward.
It noted that the bill provides a comprehensive framework for regulating all types of insurance businesses and ensuring a more robust and effective industry, and marked a significant triumph for Nigeria’s insurance industry, which is tackling the long-standing challenge of low insurance penetration.
The commission said it “believes that the bill is a game changer for Nigeria’s insurance industry, and is going to have high positive impact on the contribution of the insurance sector to the country’s GDP and economy as a whole.
“By consolidating existing insurance laws, the new legislation marks a new era in the ongoing efforts to strengthen Nigeria’s insurance industry.”
Essentially, the bill addresses the industry’s need for a more robust legal and regulatory framework, enabling it to compete favorably in the African insurance market and globally, introducing several pivotal provisions aimed at fortifying Nigeria’s insurance industry.
Key highlights of the legislation include enhanced capital requirements in the area of new minimum capital requirements for insurance companies, ensuring they are adequately capitalised to underwrite risks and protect policyholders.
The commission added that the bill ensures consolidation of the risk-based approach to supervision, enabling regulators to more effectively monitor and manage risks within the industry.
The legislation further ensures improved consumer protection requirements, safeguarding the interests of policyholders and promoting transparency and fairness in insurance practices.
It also introduced enhanced regulatory framework, providing clarity and consistency in the regulation of insurance businesses, and facilitating a more efficient and effective supervisory process.
According to the commission, NAICOM added that the achievement comes after years of operating with laws that have failed to keep pace with the country’s evolving economic landscape, unlike other sectors that have undergone multiple phases of legislative reforms to reflect current economic realities.
Sunday Aborisade, James Emejo and Ebere Nwoji
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