In a landmark move to modernize Nigeria's financial landscape, President Bola Tinubu signed the Nigerian Insurance Industry Reform Act (NIIRA) 2025 into law on August 5, 2025. This comprehensive legislation repeals the outdated Insurance Act of 2003 and consolidates several fragmented laws, including the Marine Insurance Act, Motor Vehicles (Third Party Insurance) Act, National Insurance Corporation of Nigeria Act, and Nigeria Reinsurance Corporation Act. The new Act aims to enhance transparency, boost consumer confidence, promote innovation, and align the sector with global standards, supporting the government's ambition for a $1 trillion economy by 2030. Overseen by the National Insurance Commission (NAICOM), NIIRA 2025 introduces sweeping reforms to address longstanding challenges like low insurance penetration, inadequate capitalization, and delayed claims settlements.
The Insurance Act of 2003 served as the cornerstone of Nigeria's insurance regulation for over two decades, but it fell short in adapting to evolving economic realities, digital advancements, and regional integration. Insurance penetration in Nigeria has hovered below 1% of GDP, far behind global averages, due to factors like weak enforcement of compulsory policies and insufficient consumer protections. The 2025 reform consolidates these gaps by repealing obsolete laws and introducing risk-based supervision, mandatory digital tools, and stricter oversight. This shift is expected to attract foreign investment, foster mergers among smaller players, and position Nigeria as Africa's leading insurance hub.
The Act ushers in transformative provisions across multiple areas. Below are the most notable changes, highlighting how they differ from the 2003 framework.
1. Elevated Capital Requirements for Financial Stability.
One of the most impactful reforms is the substantial increase in minimum capital thresholds, designed to ensure insurers' solvency and resilience against risks. Under the 2003 Act, capital requirements were significantly lower (e.g., ₦3 billion for non-life and ₦2 billion for life insurance), leading to undercapitalized firms vulnerable to economic shocks.
Non-life insurance: Minimum of ₦25 billion or risk-based capital (whichever is higher), up from ₦3 billion.
Life assurance: Minimum of ₦15 billion or risk-based capital, up from ₦2 billion.
Reinsurance: Minimum of ₦45 billion or risk-based capital, up from ₦10 billion.
Insurers must comply within 12 months of the Act's commencement, with NAICOM determining risk-based levels annually. This change promotes consolidation, as smaller operators may merge or exit, ultimately strengthening the sector's global competitiveness.
2. Expanded Compulsory Insurance Mandates: To boost penetration and protect vulnerable groups, NIIRA 2025 enforces and expands compulsory insurances, going beyond the limited mandates in the 2003 Act (e.g., basic third-party motor and group life).
Key new or enhanced requirements include:
Group Life Assurance: Employers must provide coverage of at least three times an employee's annual emolument, with premiums due at policy commencement.
Buildings Under Construction: Insurance against construction risks, with penalties for non-compliance.
Public Buildings and Government Assets: Coverage for hazards like fire, flood, and collapse; premiums charged to consolidated funds.
Petroleum and Gas Stations: Insurance for third-party losses from fire or explosions.
Healthcare Providers: Professional indemnity, including for mortuaries, with certificates displayed.
Aviation Services: Policies deposited with NAICOM.
Imported Goods and Containers: Must be insured with local firms.
Credit Life Insurance: Mandatory for loans over ₦10 million, covering death or disability.
Third-Party Motor Vehicle: Enhanced limits (e.g., ₦2 million for death/disability) and automatic inclusion of ECOWAS Brown Card for cross-border travel.
Hospital Expenses for Accident Victims: Up to ₦1.5 million for in-patients and ₦500,000 for out-patients.
These mandates aim to reduce uninsured risks and integrate Nigeria into regional schemes like ECOWAS.
3. Strengthened Consumer Protections and Claims Settlement.
Consumer trust was a weak point in the 2003 Act, with frequent delays in claims. NIIRA 2025 introduces robust safeguards:
Claims Timelines: Settlements within 60 days of notification, with compound interest at prevailing bank rates for delays; penalties up to ₦500,000.
Policy Delivery: Documents must be issued within 5 working days (or 30 for special risks), electronically or physically.
Third-Party Rights: Beneficiaries can directly recover from insurers in non-life policies.
Policyholder Protection Fund: Established for insolvency cases, funded by industry contributions.
Material Disclosure: Mandatory BVN/NIN for individuals and CAC documents for corporates to prevent fraud.
Breach of Terms: Insurers cannot repudiate claims unless breaches are fraudulent or fundamental.
A new Road Safety and Accident Victims Compensation Fund, funded by 1% of motor premiums, covers uninsured accidents.
4. Digitalization and Innovation
The 2003 Act lacked provisions for digital operations. NIIRA 2025 mandates digitization to improve access and efficiency:
- Electronic policy delivery, certificates, and records.
- Licensing for web-based insurance, aggregators, and electronic businesses.
- Support for innovative models like pay-as-you-go to reach underserved markets.
This aligns with broader economic digitization efforts.
5. Tighter Regulation of Intermediaries and Penalties
Intermediaries face stricter oversight to curb conflicts and unlicensed activities:
Agents and Brokers: Must hold CIIN certificates or 10+ years' experience; brokers need ₦100 million indemnity cover and limit stakes in insurers to 10%.
Loss Adjusters: Licensed with 6-year renewals; foreign firms must partner locally.
Penalties: Escalated fines (e.g., ₦25-50 million for unlicensed operations) and imprisonment; daily fines for ongoing breaches.
Anti-money laundering measures and actuarial valuations are now mandatory.
6. Other Reforms: Risk-Based Approach and Funds.
Risk-Based Supervision: Annual reports and restrictions on dividends if reserves are insufficient.
Specialized Institutions: Regulations for Takaful (Islamic insurance) and micro-insurance.
Security and Insurance Development Fun: Covers unpaid claims from insolvent insurers.
Marine Insurance Overhaul: Updated rules on insurable interests, warranties, and indemnities.
These changes are poised to increase insurance penetration, attract investments, and enhance economic resilience. However, the short compliance window for capital hikes may strain smaller firms, potentially leading to consolidations. Enforcement by NAICOM will be crucial, as will public awareness campaigns to encourage uptake of compulsory policies.