With barely a month to the July 31 recapitalisation deadline set by the National Insurance Commission (NAICOM), only 25 of the over 58 licensed insurance firms have submitted applications to appointed auditors for capital verification, raising concerns over the readiness of many operators for the regulatory requirements.

So far, at least eight firms have turned to the capital market to raise fresh funds as pressure mounts on operators to shore up their capital base ahead of the deadline.

This comes as industry-wide efforts to secure strategic investment from both domestic and foreign markets are undermined by a long history of poor governance, late and irregular filing of financial documents, and a poor reputation for market penetration, which is estimated at less than one per cent.

Amidst uncertainty, NAICOM has insisted that there is no going back on the July 31 deadline. Though many experts said extension is almost inevitable, considering the slow pace of capital mobilisation seen so far.

Insurers were previously crowded out of the investment market by banks, which had raised a whopping N4.65 trillion fresh funds to shore up their paid-up capital in line with the new regulatory threshold.

While the banks were handed 24 months, insurers were given one year to comply. Exactly a month to the end of the deadline, NAICOM has stuck to its guns.

Against all odds, no fewer than three insurance operators signalled their preparedness to recapitalise a few weeks ago.

They disclosed that they had deposited 10 per cent of their stipulated capital requirement into the Central Bank of Nigeria (CBN)-managed Policyholders’ Protection Fund as mandated by the NAICOM.

Already, most underwriters are considering the merger and acquisition (M&A) option to avoid the risk of losing their operating licences. But negotiation, according to insider information, is stalled in many cases.

Stakeholders describe the recapitalisation process as a defining moment for the future structure, stability and competitiveness of Nigeria’s insurance industry.

For clarity, under the Nigerian Insurance Industry Reform Act (NIIRA) 2025, life insurance companies are required to raise their minimum paid-up capital to N10 billion from N2 billion; non-life insurers to N15 billion from N3 billion and composite insurers are expected to increase to N25 billion. Reinsurance companies’ new capital requirement is set at N35 billion.

Also, existing operators now have a month left on the transition window, a timeline that had focused on capital mobilisation, strategic partnership negotiation and book clean-up.

Industry estimates suggest that insurers collectively need close to N1 trillion in fresh capital to meet the new thresholds. The amount is over one-fifth of the amount banks pulled from both local and international markets.

The huge capital demand is raising concerns from the insurance industry players who fear that a possible collapse may lead to massive job loss in the sector.

Multiple sources close to NAICOM told The Guardian that the regulator is determined to ensure full implementation of the deadline.

But findings revealed growing concern among operators and practitioners that Nigeria’s fragile macroeconomic environment, characterised by high interest rates, exchange-rate volatility and tightening liquidity, could severely limit access to affordable capital.

Operators point to deep-seated governance gaps in some insurers as a significant challenge, cautioning that higher capital alone would not cure longstanding deficiencies in underwriting discipline, claims management and corporate governance.

Across boardrooms, underwriting firms are under mounting pressure as the deadline draws closer.

The Deputy Commissioner for Insurance (Finance and Admin), Usman Jankara, at the EY Insurance Summit in Lagos, stressed that expressions of interest alone would not suffice for survival.

Jankara warned that only companies with verified and admissible capital would retain their operating licences after July 31.

“Persistent challenges, including complex merger-and-acquisition processes, macroeconomic volatility affecting capital, raising and capacity gaps in underwriting and risk management,” he said.

Several firms are said to have begun discussions with pension fund managers, asset managers and high-net-worth investors in Nigeria and overseas.

The Guardian gathered that some insurance companies are courting strategic investors from Europe, South Africa and the Middle East, hoping to secure long-term funding alongside technical expertise to expand their market share.

The discussions are said to be complex and time-consuming and particularly shaped by concerns around regulatory risk and the ease of repatriating returns.

While the chances of a handful of large and well-capitalised players are brightened by retained earnings and shareholder support, many mid-tier and smaller firms are struggling, counting on regulatory leniency.

The inability of operators to ramp up the capital raise is beginning to take a toll on the attraction of insurance stocks in the capital market. While the all-share index (ASI) has recorded a year-to-date (YTD) growth of 49 per cent so far, the insurance index has lost 1.75 per cent midway into the year, emerging as the only index with a negative change this year.

The signing of the Nigeria Insurance Industry Reform Act (NIIRA) saw the sector grow by 65.6 per cent last year, significantly higher than the 52 per cent gain recorded by ASI in the same year.

With its feet mired in the crisis of raising the required capital, the Nigerian Insurers Association (NIA) has expressed support for the exercise, describing it as a necessary step towards building a more resilient and credible industry.

The Director-General of the NIA, Bola Odukale, in a conversation with The Guardian at the Night of Tribute to late Dr Olawale Banmore, described the exercise as a necessary and well-timed reform.

Odukale said the association was fully committed to supporting its member companies in ensuring the successful implementation of the new regime.

She dismissed speculation that the exercise could force some insurers out of the market, stressing that the recapitalisation framework provides sufficient flexibility to accommodate all operators.

Insurers that could not meet the new minimum capital thresholds independently have the option of merging with other firms to comply, she said.

She insisted that the exercise was designed to strengthen the industry, rather than shrink it, saying no licensed insurance company was expected to exit the market because of the recapitalisation.

She said: “Stronger capital bases will enable insurers to retain more risks locally, improve claims-paying capacity and invest in digital platforms that can expand reach and improve customer experience.

Also, speaking to The Guardian in a telephone interview on the possibility of weaker insurers failing, the National Coordinator of the Independent Shareholders Association of Nigeria (ISAN), Sunny Nwosu, said the fate of policyholders must be a central concern.

Nwosu argued that beyond raising capital thresholds, the government’s action is also required to deepen insurance penetration and restore public confidence in the sector.

Nwosu said increased government patronage of insurance products would play a critical role in strengthening the industry, noting that if government agencies actively insure their assets, insurance penetration would rise significantly.

According to him, many government-owned vehicles operating on Nigerian roads are either uninsured or covered only by basic third-party policies, rather than comprehensive insurance.

He said the practice partly explains the level of poor insurance uptake in the country and undermines the sector’s credibility.

“If the government leads by example and fully embraces insurance, it will encourage Nigerians to do the same. The widespread public distrust of insurance companies remains a major obstacle to growth in the industry,” he said.

An insurance Consultant, Akinwale Ogundele, welcomed the reform, expressing hope that a leaner, but better-capitalised industry, would restore confidence in insurance as a risk management tool.

However, Ogundele urged regulators to closely monitor pricing practices to ensure that the cost of recapitalisation was not transferred to consumers through higher premiums.

The President of the Progressive Shareholders Association, Boniface Okezie, also expressed worries about governance gaps in certain firms, noting that capital alone would not resolve longstanding issues around underwriting discipline, claims management and corporate governance.

Okezie also raised concerns about the timing of the exercise, saying the prevailing macroeconomic environment could constrain access to affordable capital.

He called on the regulator to give more time, like one year, to insurance companies to mobilise money for the recapitalisation of the industry. (The Guardian)

Update news