Senate Approves Bill to Increase Capital Requirements for Insurance Companies

The Nigerian Senate has passed the Nigerian Insurance Industry Reform Bill, 2024, aimed at increasing the minimum capital requirements for insurance companies across the country. This move is part of a broader effort to modernize the industry and create a more robust legal framework for the sector.

Under the provisions of the bill, the minimum capital required for non-life insurance businesses will be ₦25 billion, while life insurance businesses must maintain at least ₦15 billion in capital. Reinsurance companies will be required to have a minimum of ₦45 billion. The bill also mandates significant penalties for unlicensed operators, including a fine of ₦25 million or a two-year prison term for individuals found operating without a license. For companies, the fine can be as high as ₦50 million for each principal officer, along with potential jail time.

“This Act, once it receives concurrence from the House of Representatives and assent from the President, will significantly contribute to shaping our economy for the better,

the Deputy Senate President Barau Jibrin said.

He added,

“Economies are dynamic and constantly changing, so it is incumbent upon the authorities of every nation to update their legislation to align with contemporary realities. This is precisely what the passage of this legislation aims to achieve.”

The bill also outlines a more stringent penalty regime, with the N25 million fine representing a 100-fold increase from the N250,000 fine for a similar offense under the previous 2003 Insurance Act. The penalty for companies in violation is even higher, with a fine of N50 million for each principal officer.

Senator Abiru Adetokunbo (APC-Lagos), who presented the report on the bill, explained that the reforms were necessary to modernize Nigeria’s insurance industry and ensure it remained globally competitive. He pointed out that the existing laws had become outdated, stating, “The current insurance legislation is over two decades old and lacks provisions to address contemporary challenges and foster growth and innovation.”

Despite the broad support for the bill, there were concerns raised about the financial burden on reinsurance companies, with Senator Jimoh Ibrahim (APC-Ondo) opposing the N45 billion capital requirement for reinsurance businesses due to Nigeria’s current economic situation.

The bill is now set to move to the House of Representatives for further consideration and, once approved, will await the assent of President Bola Tinubu. If enacted, it is expected to significantly impact the insurance industry, driving growth and fostering a more transparent and competitive environment.