Key Innovations of the Nigerian Insurance Industry Reform Act (NIIRA) 2025

The Nigerian insurance sector is undergoing a historic transformation with the enactment of the Nigerian Insurance Industry Reform Act, 2025. Recently signed into law by President Bola Ahmed Tinubu, this new insurance law replaces outdated regulations and consolidates various insurance laws into a single and modern framework. It marks a pivotal step in Nigeria’s journey toward a $1 trillion economy by 2030.

Why the Nigerian Insurance Industry Reform Act, 2025 Matters

This new act is designed to restore public confidence, attract investment and accelerate insurance penetration across Nigeria. The law empowers the National Insurance Commission (NAICOM) to regulate the industry more effectively, aligning with global best practices and reinforcing consumer protection mechanisms.

Key of NIIRA 2025

Tougher Licensing Rules for Insurance Agents
NIIRA sets strict standards for becoming an insurance agent. No one is permitted to transact insurance business in Nigeria unless licensed. Any individual operating as an agent without a licence faces penalties of up to ₦500,000, six months’ imprisonment, or both.

The law also penalises insurers who transact with unlicensed agents. Such insurers face a penalty of five times the amount of premium collected in the unlicensed transaction. Furthermore, the Act prohibits ex-convicts and bankrupt individuals from being licensed as insurance agents.

To qualify for licensing, applicants must possess a Certificate of Proficiency from the Chartered Insurance Institute of Nigeria, have at least 10 years of experience in an underwriting firm and must not have a history of dishonesty, fraud or bankruptcy. NAICOM (National Insurance Commission) retains the authority to approve or reject licence applications, with unsuccessful applicants having the right to appeal to the Commission’s board.

Heavy Sanctions for Unlicensed Insurance Business
Individuals who operate unlicensed insurance businesses now face fines of ₦25 million. For companies, the fine doubles to ₦50 million per principal officer, along with the risk of a two-year prison sentence. These strict sanctions are aimed at eliminating quack operators and protecting consumers.

Capital Recapitalisation Mandate
Under the new act, significant changes have been made to the capital requirements for insurance operators in Nigeria. Life insurance companies are now required to maintain a minimum capital base of ₦10 billion, a substantial increase from the previous ₦2 billion. For non-life insurance providers, the minimum capital has been raised from ₦3 billion to ₦15 billion.

Composite insurance firms, which offer both life and non-life insurance services, must now meet a new capital threshold of ₦25 billion, up from ₦5 billion. Meanwhile, reinsurance companies face the steepest hike, with their capital requirement rising from ₦10 billion to ₦35 billion.

In addition to these revised capital bases, the act mandates that all insurers maintain a capital adequacy ratio of 100% at all times. This ensures that companies are not only well-capitalised on paper but are also financially sound in their day-to-day operations. These reforms represent the first major revision of capital requirements in nearly two decades and are aimed at strengthening the resilience of the sector and reducing systemic risk.

Zero Tolerance for Delayed Claims
The Act imposes strict timelines for claim assessments, approvals and disbursements. Failure to comply attracts penalties or suspension of operating licences, reinforcing accountability and customer trust.

The Act enforces broader compulsory insurance schemes and introduces a policyholder protection fund financed by 0.25% of every operator’s gross life premium. This ensures that consumers are compensated even when an insurer becomes insolvent.

Digital Transformation of Insurance Operations
The Act mandates digitisation across the entire insurance value chain, from licensing and product approvals to claims processing and regulatory filings. All processes must now be handled through NAICOM-managed digital platforms to enhance transparency and operational efficiency.

Regional Integration
The law encourages Nigeria’s active participation in regional insurance frameworks, such as the ECOWAS Brown Card System. This allows insurance coverage and claims settlement to be honoured across borders within the West African region.

A New Era for Nigeria’s Insurance Sector
The new act is a strong signal that Nigeria’s insurance industry must grow and improve or risk becoming irrelevant. The changes are expected to lead to mergers, stricter regulation and greater trust from the public. Smaller insurance companies that can’t meet the new standards may have to merge with others or leave the industry, while stronger companies will take their place.

For investors and other stakeholders, these reforms open the door to new opportunities, better returns and a more secure business environment. The law also supports Nigeria’s wider goal of creating a stronger, more diverse economy.

Conclusion:

With the emergence of this new law, Nigeria’s insurance sector is entering a new and exciting phase. This law will help the industry grow, reach more people and protect policyholders better. The focus now shifts to NAICOM and insurance companies to follow through and bring the law’s goals to reality.

References

1. ICIR, ‘Tinubu Signs Nigerian Insurance Industry Reform Bill into Law’ (August 2025) [https://icirnigeria.org/tinubu-signs-nigerian-insurance-industry-reform-bill-into-law/]
   (https://icirnigeria.org/tinubu-signs-nigerian-insurance-industry-reform-bill-into-law/) accessed 10 August 2025.
2. The Guardian Nigeria, ‘Lawmakers Pass Insurance Industry Reform Bill’ (March 2025)
   [https://guardian.ng/news/lawmakers-pass-insurance-industry-reform-bill/]
   (https://guardian.ng/news/lawmakers-pass-insurance-industry-reform-bill/) accessed 10 August 2025.
3. Nairametrics, ‘Unlicensed Insurance Agents Face 6-Month Jail Term’ (August 2025)
   [https://nairametrics.com/2025/08/06/nigerian-insurance-reform-act-unlicensed-agents-face-6-month-jail-term-across-nigeria/]
   (https://nairametrics.com/2025/08/06/nigerian-insurance-reform-act-unlicensed-agents-face-6-month-jail-term-across-nigeria/) accessed 10 August 2025.
4. Nairametrics, ‘Senate Proposes ₦25m Fine for Unlicensed Operators’ (August 2024)
   [https://punchng.com/senate-proposes-n25m-fine-for-unlicensed-insurance-operators/]
   (https://punchng.com/senate-proposes-n25m-fine-for-unlicensed-insurance-operators/) accessed 10 August 2025.
5. NAICOM, ‘NIIRA Act 2025 Will Revolutionise Insurance Industry’ (August 2025)
   [https://naicom.gov.ng/niira-act-2025-will-revolutionise-insurance-industry/]
   (https://naicom.gov.ng/niira-act-2025-will-revolutionise-insurance-industry/) accessed 10 August 2025.
6. BusinessNigeria, ‘Senate Passage Marks Watershed for Insurance Sector’ (December 2024) [https://businessnigeria.ng/senate-passage-marks-watershed-for-insurance-sector/] (https://businessnigeria.ng/senate-passage-marks-watershed-for-insurance-sector/) accessed 10 August 2025.

Source: Thenigerialawyer