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For many manufacturers, insurance has long been regarded as little more than a regulatory obligation rather than a strategic business asset. It often becomes a priority only after a major disruption, a factory fire, cargo loss, machinery damage or delays to investment projects caused by inadequate insurance cover.
Manufacturers also contend with rising insurance costs, driven largely by worsening insecurity, which has pushed up premiums for factory assets and operations. Combined with Nigeria’s low insurance penetration, estimated at less than one per cent of Gross Domestic Product (GDP), these challenges have left many businesses exposed to financial losses that weaken their capacity to invest and expand.
Industry stakeholders, however, believe this could change as Nigeria’s insurance recapitalisation reforms take effect.
The reforms are expected to strengthen the financial capacity of insurance companies, enabling them to underwrite larger and more complex industrial risks while providing manufacturers with better access to risk financing.
The Pan African Manufacturers Association (PAMA), in its review of recent policy developments, described the reforms as part of a more focused and implementation-driven industrial policy aimed at improving the competitiveness of local industries.
For years, limited capital has prevented many Nigerian insurers from underwriting large industrial risks. As a result, manufacturers seeking cover for factories, engineering projects, specialised equipment, marine cargo and business interruption have relied heavily on foreign reinsurance markets.
While overseas reinsurance has helped spread risks, it has also increased costs, prolonged underwriting processes and, in some cases, complicated claims settlement, making comprehensive insurance more expensive and less accessible for manufacturers undertaking major investments.
PAMA Secretary-General, Segun Ajayi-Kadir, said the implementation of enhanced capital requirements under the Nigeria Insurance Industry Reform Act (NIIRA) 2025 represents a significant milestone for the sector.
According to him, the Federal Government’s recapitalisation framework is designed to strengthen insurers’ financial capacity, allowing them to retain larger and more sophisticated risks within the domestic market while supporting long-term economic growth.
He noted that the benefits for manufacturers go beyond the prospect of lower insurance costs. Better-capitalised insurers would be able to develop specialised products tailored to the needs of the manufacturing sector, including cover for supply chain disruptions, machinery breakdown, engineering risks, cyber threats, business interruption and export credit.
Ajayi-Kadir added that stronger insurance capacity could also improve manufacturers’ access to finance.
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“Financial institutions typically require comprehensive insurance before approving loans for factories, equipment purchases and large industrial projects. A more robust insurance industry would therefore make it easier for manufacturers to secure funding and accelerate expansion plans.”
He further observed that improved insurance capacity would enhance investor confidence, providing greater assurance that investments in factories, industrial parks and export-oriented manufacturing projects are adequately protected against unforeseen risks.
“The reform could also improve access to project finance, as lenders typically require comprehensive insurance cover before financing major manufacturing investments.
“Competition within a stronger insurance market is also expected to encourage product innovation. Manufacturers may benefit from broader coverage for supply-chain disruptions, cyber risks, engineering projects, machinery breakdown, business interruption and export credit, reflecting the increasingly complex risk profile of modern industrial operations.”
PAMA acknowledged that the recapitalisation process is likely to trigger mergers, acquisitions and strategic partnerships across the insurance industry, leading to changes in underwriting practices, pricing structures and product offerings. Although these adjustments may create short-term uncertainty, the association believes they will ultimately produce a stronger, more resilient and competitive insurance market.
According to Ajayi-Kadir, a stronger insurance industry will provide manufacturers with more reliable risk protection, improve investment confidence and reinforce the foundation for industrial expansion.
He stressed that insurance should no longer be viewed merely as a regulatory requirement but as a critical enabler of industrial development.
“As Nigeria pursues economic diversification and seeks to expand its manufacturing base, effective risk management will become increasingly essential.”
Ajayi-Kadir urged manufacturers to take advantage of the ongoing reforms by reviewing their insurance programmes, reassessing their risk management strategies and engaging insurers to develop products that support business continuity, export growth and long-term expansion.
“Manufacturers should use this transition to reassess their risk management strategies, review insurance programmes and engage with insurers on products that better support expansion, exports and business continuity.”
He maintained that achieving Nigeria’s industrialisation ambitions will depend not only on improved infrastructure, financing and productive capacity, but also on a stronger insurance industry capable of protecting the investments that drive sustainable manufacturing growth.
