New consolidated insurance bill excites NAICOM

THE National Insurance Commission (NAICOM) has commended the passage of the new Consolidated Insurance Bill by the Senate and expressed optimism that the legislation will unlock the insurance sector’s growth.

The NAICOM believed that the bill would impact the insurance industry positively, ensure prosperity, and contribute to the nation’s gross domestic product (GDP) and the economy as a whole.

The Commission said by consolidating existing insurance laws, the new legislation marks a new era in the ongoing efforts to strengthen the country’s insurance industry with a comprehensive framework for regulating all types of insurance businesses and ensure a more robust and effective sector.

According to NAICOM, the bill marks a significant triumph for the insurance industry, as it tackles the long-standing challenge of low insurance penetration in the country.

It noted that “The new legislation addresses the industry’s need for a more robust legal and regulatory framework, enabling it to compete favourably in the African insurance market and globally”.

Also, the newly passed bill introduced several pivotal provisions to fortify Nigeria’s insurance industry.

Key highlights of the proposed act provides for the increase in capitalisation from the current N2 billion to N10 billion (life assurance), N3 billion to N15 billion (non-life insurance), and N10 billion to N35 billion (reinsurance).

The new minimum capitalisation is necessitated by several factors, including currency depreciation, provisions in the Finance Act 2022, which redefined the composition of capital, inflation, international competitiveness, AfCFTA competitiveness, capital flight due to overreliance on foreign insurance, and emerging risks such as cyber insurance and consumer credit insurance.

Other key highlights of the legislation include:

“Enhanced Capital Requirements: New minimum capital requirements for insurance companies, ensuring they are adequately capitalized to underwrite risks and protect policyholders.

“Risk-Based Supervision: Consolidation of the risk-based approach to supervision, enabling regulators to more effectively monitor and manage risks within the industry.

“Strengthened Consumer Protection: Improved consumer protection requirements, safeguarding the interests of policyholders and promoting transparency and fairness in insurance practices.

“Streamlined Regulatory Framework: An enhanced regulatory framework, providing clarity and consistency in the regulation of insurance businesses, and facilitating a more efficient and effective supervisory process”.

The NAICOM said this achievement comes after years of operating with laws that have failed to keep pace with the country’s evolving economic landscape, unlike other sectors that have undergone multiple phases of legislative reforms to reflect current economic realities.

The bill will repeal the Insurance Act, CAP. 127 Laws of the Federal Republic, 2004 when it becomes a law, consolidates the Marine Insurance Act, 2004; the National Insurance Corporation of Nigeria Act, 2004; and the Nigeria Reinsurance Corporation Act, 2004.

Also, the bill enacts the Nigeria Insurance Industry Reform Act, 2024 to provide a comprehensive legal and regulatory framework for Nigeria’s insurance businesses and related matters.

Once the bill receives concurrence from the House of Representatives and assent from the President, it will significantly contribute to shaping the insurance industry and the economy for the better.

Joseph Inokotong