Nigerian Senate Approves 400% Capital Hike For Insurance Companies

The Senate on Tuesday passed a bill to raise the minimum capital for insurance companies in Nigeria from ₦2 billion to ₦10 billion, marking a 400% increase.

The bill was sponsored by the chairman of the Senate Committee, Adetokunbo Abiru, on Banking, Insurance, and Other Financial Institutions, Punch reported. It was passed after reviewing the committee's report in detail at the Committee of the Whole, led by Deputy Senate President Barau Jibrin.

Abiru explained that capital increases were needed due to the depreciation of the Nigerian currency, pointing out that the current insurance laws no longer reflect the realities of today and cannot address the modern challenges faced by the industry.

He noted that these laws, some of which have been in place for over 30 years, do not align with the evolving needs of Nigeria's insurance sector. This legal outdatedness has contributed to regulatory inefficiencies, hindering the industry's ability to compete globally.

The bill also increases reinsurance for insurance companies from ₦10 billion to ₦35 billion and raises the minimum capital for non-life insurance from ₦3 billion to ₦15 billion.

The bill aims to regulate the insurance industry in Nigeria by bringing together existing laws, including the Insurance Act of 2003, the Marine Insurance Act, the Motor Vehicles (Third Party Insurance) Act, the National Insurance Corporation of Nigeria Act, and the Nigeria Reinsurance Corporation Act.

Section 15 of the bill states that no one can operate an insurance business in Nigeria unless they meet the required minimum capital. For non-life insurance, the capital must be the higher than ₦15 billion or the risk-based capital set by the commission.

For life assurance, the capital must be the higher than ₦10 billion or the risk-based capital determined by the commission. Meanwhile, for the reinsurance business, the capital must be higher than ₦35 billion or the risk-based capital set by the commission.

However, Senator Jimoh Ibrahim from Ondo South raised concerns that the increase in insurance capital could cause insurance companies in the country to shut down.

He pointed out that there was only one reinsurance company, and with the new capital requirements, 20% of it will be deposited in the Central Bank of Nigeria permanently. He argued that this increase could lead to the closure of these companies.