NAICOM increases capital requirements for insurance companies by 400%

The National Insurance Commission (NAICOM) has increased the capital requirement for insurance businesses in Nigeria.

According to the Nigerian Insurance Industry Reform Act 2025, the minimum capital base for non-life insurers has been raised to N15 billion, while life insurance firms must now require at least N10 billion capital.

Reinsurance companies got the steepest increase, with their capital threshold now pegged at N35 billion.

“A person shall not carry on insurance business in Nigeria unless the insurer has and maintains, while carrying on that business, a minimum capital, in the case of non-life insurance business, the higher of N15,000,000,000, or risk-based capital determined by the commission,” the Act said.

“Life assurance business, the higher of N10,000,000,000, or risk-based capital determined by the commission.

“Reinsurance business, the higher of N35,000,000,000, or risk-based capital determined by the commission.

“In determining the risk-based capital required, the Commission shall take into consideration the capital for insurance risk, market risk, credit risk and operational risk and apply such capital charges on assets and liabilities as shall be determined.

“For the purpose of this section, “capital charge” means the proportion of capital required to take care of the potential deterioration of the economic value of an asset and the uncertainty in estimating liability due to the occurrence of an adverse event.”

Prior to the law, the required capital base for reinsurance firms, non-life, and life insurance companies was N10 billion, N3 billion, and N2 billion, respectively.

This indicates a 400 percent increase for life and non-life insurance companies and a 250 percent raise for reinsurance organisations.

The Act said the minimum capital required for a new insurance company may be made up of government bonds, treasury bills, or cash and cash equivalents.

“The minimum capital requirement as specified in subsection (1) shall, in the case of existing company, consist of one or more of — (a) the excess of admissible assets over liabilities, less the amount of own shares held by the firm; (b) subordinated liabilities subject to approval by the commission; (c) any other financial instrument as may be prescribed by the commission,” the Act said.

The law added that insurers already operating before the Act came into effect are required to meet the new capital requirements within 12 months of its commencement.