Nigerian Senate Passes Insurance Reform Bill, Raises Minimum Capital Requirements

The Nigerian Senate has passed the Insurance Reform Bill 2024, proposing significant increases in minimum capital requirements for insurance companies and consolidating multiple outdated insurance legislations.

The bill, sponsored by Senator Mukhail Abiru, chairman of the Senate Committee on Banking, Insurance and Other Financial Institutions, increases capital base requirements across insurance sectors:

• Life insurance companies: From N2 billion to N15 billion
• General business insurance: From N3 billion to N25 billion
• Reinsurance businesses: From N10 billion to N45 billion

Section 15 of the bill mandates that no insurance business can operate in Nigeria without meeting these new minimum capital requirements. The legislation will now proceed to the House of Representatives for concurrence before being transmitted to President Bola Tinubu for final assent.

Abiru emphasized that the bill addresses critical industry challenges by consolidating obsolete legislation dating back to 2003, including the Insurance Act, Marine Insurance Act, National Insurance Corporation Act, and Nigerian Reinsurance Act.

“They do not resonate with the current dynamics and evolving needs of Nigeria’s insurance industry. All these legislations have surpassed the three-decade mark and the lack of issues that can adequately address contemporary challenges and support growth and innovation to this leading industry. These legal obsolescence has led to some of the regulatory inefficiencies in the insurance industry, and these have also hampered the industry’s ability to successfully compete on a global level” Abiru stated.

“Another objective is also its need for a robust legal and regulatory framework that will ensure that the insurance sector contributes positively to the principal objectives of the financial system in order to make Nigeria Africa’s financial hub and one of the 20 largest economies in the world,” he senator added.

Stakeholders anticipate the enhanced capitalization will empower insurance companies to underwrite high-risk ventures and improve retention capacity in the local market as the bill seeks to overhaul the insurance regulatory framework, modernizing the sector’s approach to risk management and global competition.

Once enacted, insurance companies will be required to comply with the new capital requirements to continue their operations in Nigeria.