The National Insurance Commission has introduced new guidelines that will require all insurance companies in Nigeria to contribute part of their earnings into a special fund designed to protect policyholders when insurers fail to meet their obligations.

The new framework, issued under the Nigerian Insurance Industry Reform Act, 2025, sets up the Insurance Policyholders’ Protection Fund as a financial safety net to ensure that Nigerians who hold insurance policies can still receive their claims even if an insurer becomes insolvent or loses its licence.

According to the Commission, the Fund will be financed through a mandatory annual contribution of 0.25 per cent of the net premium income of every insurer and reinsurer operating in the country. It explained that this contribution will be calculated after deducting brokerage commissions from gross premiums, and payments must be made into designated accounts with deposit money banks not later than June 30 each year.

The guidelines state that “the Fund shall be used for the purpose of resolving distress and insolvencies of licensed insurers or reinsurers and payment of claims… which remain unpaid by reason of insolvency or cancellation of licence,” making it clear that the policy is aimed at restoring confidence in the insurance sector.

To ensure transparency and accountability, the Commission said the Fund will be managed independently by a qualified fund manager, who must be registered with the Securities and Exchange Commission and have a minimum capital base of ₦5 billion. The manager is expected to invest the funds in low-risk, government-backed instruments to guarantee safety and liquidity, while also submitting quarterly reports, annual audited accounts and stress test results to regulators.

Under the arrangement, disbursements from the Fund will be made as loans to troubled insurance firms strictly for the purpose of settling policyholders’ claims. The guidelines make it mandatory that any money released must be paid to legitimate claimants within 10 working days, while repayment by the benefiting insurer must be completed within a maximum period of 24 months or earlier once the company recovers.

The Commission added that access to the Fund will follow a strict process, including submission of financial records, claims registers, actuarial valuations and recovery plans, as well as due diligence by external auditors before approval is granted.

To strengthen oversight, a dedicated committee will supervise the Fund, comprising representatives of the Commission, the insurance industry and the appointed fund manager, who will serve as secretary. The committee is expected to meet quarterly and ensure that decisions are made in the best interest of policyholders.

The guidelines also introduce strict compliance measures. Any insurer that fails to contribute to the Fund or repay loans risks losing its operating licence, while companies are required to report any imprudent practices within five days of becoming aware of them.

In addition, whistleblowers are to be fully protected, with the Commission stating that no individual who reports wrongdoing should face “retaliation, intimidation, threat, or any form of adverse action.”

The Commission said it will publish compliance levels within the industry and may impose penalties based on the seriousness of any breach, including measures to ensure that no company benefits financially from regulatory violations.

The new policy, which took effect from July 31, 2025, marks a major shift in Nigeria’s insurance regulation by creating a structured system to safeguard policyholders and improve trust in the industry, especially at a time when concerns over delayed or unpaid claims have continued to affect public confidence.

‎Experts have said that the newly signed Nigerian Insurance Industry Reform Act has strengthened the ability of the sector to improve its contribution to the nation’s Gross Domestic Product, GDP.
‎Industry experts who spoke at the insurance and pension journalist conference maintained that the new legislation could position insurance as a key driver of Nigeria’s vision of building a $1 trillion economy.
‎The NIIRA 2025 was signed into law by President Bola Tinubu in July 2025 and is designed to expand insurance penetration and improve industry stability.
The Commissioner for Insurance/CEO, National Insurance Commission (NAICOM), Mr. Olusegun Omosehin, said that the NIIRA will lead to economic growth, employment generation, and more local retention capacity.
‎The Commissioner, who was represented by the Director, Legal, Enforcement, and Market Development, NAICOM, Dr. Tamis Usman, said one of the key things is the repositioning of the sector in terms of the financial muscle.
Stating that NIIRA has introduced two tiers of capital, he said the first is the minimum capital requirement.
He said: “The minimum capital has been shored up to N10 billion for Life, N15 billion for Non-Life, and N35 billion for Reinsurance. What this translates to is that insurance companies will have more capacity, higher businesses, take care of higher risks and retain local content. This will also lead to economic growth, employment generation and more retention of local capacity domestication.
‎“The second layer is the Risk-Based Capital. This is not a one-size-fits-all. It is time for operators to provide capital that matches the level of their risk exposure. What the regulator is expected to do is to determine that, for an underwriter to underwrite any level of business, you must have a certain level of capital threshold in relation to your risk exposure. What that translates to is that, apart from what we are seeing in terms of that, yes, the company can write, it also translates to building confidence in the insurance sector, and I am sure that for the company to be able to underwrite this kind of business, it has the financial capability to do it.”
‎Usman asserted that with the NIIRA 2025, companies will be able to pay claims, saying, “The role of the regulator is to make sure that operators pay claims. And that will now boost the trust in the insurance sector.
‎”Another thing that the new Act is encouraging is simplicity of operations. In this case, even the Proposal Form should be as simple as possible for the prospect to be able to understand what he/she is going into.
‎“The law also provides that before the commencement of your policy, you must issue a policy document called terms of contract. This was not captured in the previous legal instruments. The law says the policy document must be in simple and clear terms that anybody can see, read and understand. This alone will build trust and boost public confidence in the insurance sector”, he noted.
‎The Director-General, Nigerian Insurers Association, Mrs. Bola Odukale, in her comments said that the NIA was going to ensure implementation of NIIRA.
‎“One thing is to have a law; another thing is to get those laws implemented. If implementation is not strong enough, it is just as good as papers in which we have all those laws written. This is where NIA comes in terms of implementation. We, as NIA, our members, the operators, our first responsibility is to ensure the implementation of these laws as the regulator begins to come up with different regulations around the different aspects of the act.
‎“One of the ways we will also ensure that implementation happens is that we are well aware of self-regulation in this industry. How much are we willing to push ourselves to do? How much are we truly willing to ensure that we follow through with the dictates of those acts so that indeed we can enjoy the benefits that are in those acts? That is the first thing. Of course, when you talk of awareness creation, a lot of people know that indeed, there is NIIRA out there. But for the insurance public, just a few of them know that there is one act out there. What do we need to be doing? We are going to be working with our members to ensure that we create awareness in this market.
‎”If you look at NIIRA very well, there are various opportunities that are embedded in that act, in terms of, for example, compulsory insurance. A tanker on the road is meant to have insurance; the petrol stations are meant to have insurance; buildings under construction need to have insurance; there is insurance for containers. All of these are things / that are compulsory for the benefits of everybody, both to the industry and much more to the insuring public, to ensure that there is protection for the risk we are exposed to.”
‎Odukale added that NIA would be working with its members to create awareness about the law and its impact.
‎”In the course this week, we are going to have a webinar that we are planning to educate our members in terms of underwriting, building under construction or public liability in terms of the liability we are exposed to. In terms of product development, we will continue to research. We will continue to work with our members to ensure that actions are taken, not only talking.
‎”We are working with our members to ensure timely claims payment because if obligations are not met as they come due, the confidence of the people will continue to be eroded in the industry,” she concluded.
‎A panelist at the conference who is the Executive Director, Business Operations, emPLE Life Assurance, Mr. Makanjuola Tubi on his part said capturing value from the reforms by reaching the underserved population was crucial to enhancing the contributions of insurance and pension to the Gross Domestic Product of the country.
‎”Regulation has been done and it is now time to enforce and strengthen both the insurance and pension industry. There is a large opportunity of uncaptured market that is there for the taken. Some of the things that we as operators need to quickly latch on to are how do we take advantage of this untapped market?
‎”A lot was said about the informal sector, which is contributing about 60 per cent to the country’s Gross Domestic Product (GDP). If we don’t have that sector actively playing in the insurance and pension, then we can see why the contribution to the GDP is where it is today. So, as operators, essentially, we need to look for creative ways to expand and increase financial inclusion because opportunities are really there”, he added.