The Senate, on Tuesday, passed a bill seeking to increase the capital base of risk-based insurance companies in the country while reducing the figures earlier proposed in the bill.
This followed the consideration and adoption of the recommendations in the report of the Senate Committee on Banking, Insurance, and Other Financial Institutions on the Nigerian Insurance Industry Reform Bill, 2024, presented during plenary by its chairman, Senator Adetokunbo Abiru (APC, Lagos East).
The relevant laws in the bill include an act to repeal the Insurance Act, CAP. 127 Laws of the Federal Republic, 2004; the Marine Insurance Act, 2004; the National Insurance Corporation of Nigeria Act, 2004; and the Nigeria Reinsurance Corporation Act, 2004. The bill enacts the Nigeria Insurance Industry Reform Act, 2024 to provide a comprehensive legal and regulatory framework for insurance businesses in Nigeria and for related matters.
The earlier provision of the bill pegged the minimum capital requirement for non-life insurance businesses at N25 billion, life assurance businesses at N15 billion, and reinsurance businesses at N45 billion.
Presenting the report, Senator Abiru said: “A person shall not carry on insurance business in Nigeria unless the insurer has and maintains, while carrying on that business, a minimum capital of (i) N15,000,000,000.00 (N15 billion), or (ii) risk-based capital determined by the commission.
“For life assurance business, the higher of (i) N10,000,000,000.00 (N10 billion), or (ii) risk-based capital determined by the commission.
“For reinsurance business, the higher of: (i) N35,000,000,000.00 (N35 billion), or (ii) risk-based capital determined by the commission.”
He added that in determining the risk-based capital required, “the commission shall take into consideration the capital for insurance risk, market risk, and operational risk and apply such capital charges on assets and liabilities as shall be determined from time to time.”
Senator Abiru explained that the increase in minimum capital—from the current N2 billion to N10 billion (life insurance), N3 billion to N15 billion (non-life insurance), and N10 billion to N35 billion (reinsurance)—is necessitated by several factors, including depreciation in the value of the currency, provisions in the Finance Act 2022, which redefined the composition of capital, inflation, international competitiveness, AfCFTA competitiveness, capital flight due to overreliance on foreign insurance, and emerging risks such as cyber insurance and consumer credit insurance.
He noted that the minimum capital is to be deposited with the Central Bank of Nigeria.
Senator Abiru disclosed that stakeholders at the public hearing widely supported the bill, stressing that existing laws no longer meet the evolving needs of the industry.
“The current insurance legislation is over two decades old and lacks provisions to address contemporary challenges and foster growth and innovation,” he said.
In his contribution, Senator Jimoh Ibrahim (APC, Ondo South) expressed concerns about the proposed N45 billion minimum capital requirement for reinsurance businesses, suggesting that the status quo be maintained given the current economic situation.
However, Deputy Senate President Senator Barau Jibrin emphasised the importance of passing the bill to align the insurance industry with contemporary economic realities for the nation’s benefit.
He said: “This Act, once it receives concurrence from the House of Representatives and assent from the President, will significantly contribute to shaping our economy for the better.
“Economies are dynamic and constantly changing, so it is incumbent upon the authorities of every nation to update their legislation to align with contemporary realities.
“This is precisely what the passage of this legislation aims to achieve: to restructure the entire insurance ecosystem in line with current realities.
“I am confident that the country will benefit greatly when the law is eventually assented to.”
Nigerian Senate sets new minimum capital requirement for insurance business