NAICOM launches fund to protect insurance policyholders

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.