Insurance Reform Act 2024 Gains Lawmakers’ Approval

The Nigerian House of Representatives has passed the Nigeria Insurance Industry Reform Act, 2024, marking a significant step toward establishing a modern legal and regulatory framework for the country’s insurance sector.

This Act categorizes insurance into two classes—life and non-life—and mandates higher minimum capital requirements for various insurance categories.

In doing so, the Act supersedes several outdated laws, including the Insurance Act, Cap 117, and other related legislations from the Laws of the Federation of Nigeria, 2004. The resolution of the House came after a thorough clause-by-clause consideration of the bill, which had previously been passed by the Senate. The deliberations were led by House Leader, Professor Julius Ihonvbere, during the plenary session.

The primary aim of the newly passed legislation is to reform and regulate the insurance industry in a manner that ensures the protection of policyholders and other stakeholders, all while fostering a viable and competitive insurance market. It also sets clear requirements for individuals and organizations intending to operate insurance businesses in the country. As stated in the Act, no entity can engage in insurance, reinsurance, or related business activities without obtaining a license from the commission. Applications for such licenses must adhere to prescribed formats and include all supporting documents requested by the commission.

The Act further outlines grounds for license revocation, such as non-compliance with sound insurance principles, failure to meet capital or solvency requirements, or ceasing operations for over a year in Nigeria. The bill also establishes minimum capital requirements: N15 billion for non-life insurance, N10 billion for life assurance, and N35 billion for reinsurance. The Act requires new entrants into the insurance industry to deposit 50% of the minimum capital with the Central Bank of Nigeria, with 80% of the deposit refunded upon registration. Existing insurance companies, however, are required to deposit only 10% of their minimum capital.

In addition, the commission will adopt a risk-based approach when assessing the required capital, taking into account factors such as insurance, market, credit, and operational risks. By introducing these stringent reforms, the Act seeks to transform Nigeria’s insurance landscape into a more structured and reliable industry.