Nigeria@66: Long road from foreign-dominated insurers to N5.5trn industry

From Adanna Nnamani, Abuja

For 66 years, Nigeria’s insurance penetration has remained less than one per cent, despite the fact that the economy and population have grown exponentially since October 1, 1960.

This abysmal level is what experts must address as the nation grows older.

From about 25 insurers operating at independence to a modern industry now undergoing recapitalisation, Nigeria’s insurance sector has travelled a long and uneven road.

But low penetration, weak enforcement, public distrust, limited risk capacity and a largely informal economy remain major hurdles.

The new insurance law and stronger capital base could mark another turning point.

When Nigeria became independent in 1960, insurance was already part of the country’s commercial landscape. But it was a very different industry from the one operating today.

The business was largely foreign-owned, closely tied to British commercial interests and concentrated around organised businesses, government institutions and the emerging urban economy.

Available historical records show that about 25 insurance companies were operating in Nigeria at independence, only four of them Nigerian-owned. The market had developed from the activities of foreign insurers that had established branches during the colonial era, with the first foreign insurance operation traced to 1921 and the first indigenous insurer emerging in 1955.

Sixty-six years later, insurance has become a significant component of Nigeria’s financial system, covering everything from motor vehicles, homes and businesses to oil and gas, aviation, marine transport, life, pensions-related annuities, agriculture and emerging digital risks.

Yet, the paradox, stakeholders note, remains striking, which is that Nigeria has one of Africa’s largest populations and economies, but only a small fraction of its people and businesses are adequately insured. That contradiction explains much of the story of the industry since independence.

From colonial legacy to Nigerian ownership

The first major task after independence was to move insurance from a predominantly foreign-controlled business into a properly regulated Nigerian industry.

The Insurance Companies Act of 1961 introduced the first major post-independence regulatory framework. It required insurers to obtain licences before commencing business and established the Department of Insurance within the Federal Ministry of Trade. The Nigerian Corporation of Insurance Brokers was established in 1962, while the Nigerian Insurers Association emerged in 1971. The government also became increasingly concerned about the amount of insurance business and premium income leaving the country.

This led to the indigenisation policies of the 1970s. By 1976, the market had grown to about 70 insurers, comprising foreign, local and government-owned companies. Yet local ownership did not necessarily translate into a proportionate share of premiums. Historical research shows that although 46 of the 70 insurers were locally owned at the time, they accounted for only about 17 per cent of gross written premiums.

The government therefore intervened more aggressively.

The 1976 Insurance Decree strengthened regulation and introduced minimum capital requirements. The period also witnessed the creation of important national institutions. The National Insurance Corporation of Nigeria, NICON, was established as a government-owned insurance company, while the Nigeria Reinsurance Corporation was created in 1977 to strengthen domestic reinsurance capacity and retain more insurance risk within the country.

The thinking was that Nigeria should not merely collect insurance premiums; it should also retain the financial capacity to underwrite its own risks.

Indigenisation to liberalisation

The policy pendulum later swung in the opposite direction.

The 1987 Privatisation and Commercialisation Decree began reversing aspects of the earlier state-dominated approach. The following years witnessed increased private-sector participation and the emergence of more insurance companies.

The growth, however, came with its own problems.

The industry became fragmented, with many relatively small operators competing for business. Regulation and supervision struggled to keep pace with the expansion.

The need for stronger oversight eventually became impossible to ignore.

A major turning point came in 1997 with the establishment of the National Insurance Commission, NAICOM.

The commission was created to strengthen the regulation, supervision and control of insurance business in Nigeria. It became the apex regulator responsible for setting standards, protecting policyholders, approving insurance rates and supervising insurers and reinsurers.

The Insurance Decree of 1997 also substantially raised capital requirements.

Six years later, the Insurance Act 2003 replaced the 1997 decree and became the principal legal framework governing the sector for more than two decades.

But the biggest structural shake-up of the early 2000s was yet to come.

The consolidation era

Nigeria’s insurance industry entered a new phase in 2005-2007 as regulators pursued consolidation through higher capital requirements.

The objective was to create stronger insurance companies with the financial capacity to underwrite bigger risks, improve corporate governance and compete more effectively.

The exercise dramatically reduced the number of operators.

According to a historical review of the industry, the number of insurers fell from 103 to 53 following the sharp increase in minimum capital requirements in 2007.

The consolidation also changed the character of the industry.

Bigger companies emerged, mergers and acquisitions became more prominent and insurers became more sophisticated in their financial reporting, risk management and investment activities.

But consolidation did not automatically solve the industry’s most stubborn problem: getting Nigerians to buy insurance.

That challenge has persisted through successive regulatory reforms.

The insurance paradox

For decades, Nigeria’s insurance industry has faced a basic contradiction.

On one hand, the country has enormous insurable assets and risks.

Millions of vehicles move daily on Nigerian roads. Businesses operate factories, shops, warehouses and offices. Millions of workers earn incomes. Farmers cultivate vast areas of land. Ships bring cargo through Nigerian ports. Aircraft operate domestic and international routes. Homes and commercial buildings are constructed every year.

Oil companies, banks, telecommunications companies, manufacturers and other large corporations also carry billions of naira worth of assets and liabilities. All these activities require risk protection. Yet insurance penetration remains low.

NAICOM said in 2025 that insurance penetration in Nigeria was about 0.5 per cent, placing the country 70th globally and fifth in Africa, compared with about 11 per cent in South Africa. The implication is enormous. It means the size of the potential market is much bigger than the market currently captured by insurers.

The problem is not simply the number of insurance companies. It is the depth of insurance coverage across households, small businesses, farms and the informal economy.

Why Nigerians remain underinsured

Several factors explain the gap. The first is income. For millions of households struggling with food, transport, rent, school fees and healthcare, insurance can appear to be an expense for another day rather than a priority today. The second is the size of the informal economy.

A large part of Nigerian economic activity occurs outside formal corporate structures. Many small traders, artisans, farmers, transport operators and micro-businesses have limited access to formal financial products. The third is trust.

Insurance works differently from many products because customers pay for protection against an event that may never happen. The benefit becomes obvious when there is a fire, accident, death, flood, theft or other insured event.

Where customers experience delays, disputes or difficulty obtaining claims, confidence suffers. This makes claims settlement central to the future of the industry.

NAICOM’s latest data, however, shows signs of improvement.

In the second quarter of 2026, insurers reported gross claims of N369.2 billion, while net claims paid stood at N279.1 billion. The commission said incomplete or delayed documentation remained one factor affecting claims settlement.

The figures also show that insurance is no longer a marginal financial activity.

An industry growing in size

The numbers tell a different story from the industry’s historically low penetration.

In the fourth quarter of 2025, Nigeria’s insurance market recorded gross premium written of N2.30 trillion, representing 47.3 per cent year-on-year growth, according to NAICOM. Oil and gas was the largest non-life business, while annuity funds were the major driver within life insurance.

The market has continued expanding in 2026. In the second quarter of 2026 alone, gross premium written reached N1.285 trillion, up 38 per cent from the previous quarter and 5.9 per cent year-on-year. NAICOM said the industry’s growth was above real national output growth of 4.4 per cent during the same period.

Non-life insurance accounted for 66.2 per cent of premiums in Q2 2026, while life insurance accounted for 33.8 per cent.

Within non-life, oil and gas remained the largest contributor, followed by fire and motor insurance.

The structure reveals something important about Nigeria’s insurance economy: large corporate and commercial risks still account for a significant portion of the market.

The challenge is to take insurance deeper into households, micro-businesses and the vast informal economy.

Life insurance and the annuity opportunity

Life insurance has gradually become a more important part of the market.

In Q2 2026, individual life accounted for 43.4 per cent of life premiums, group life 27.5 per cent and annuity 29.1 per cent.

Annuity business has been particularly important because it connects insurance with Nigeria’s retirement and long-term savings system.

By Q4 2025, annuity accounted for 44.3 per cent of life premiums, compared with 36.2 per cent for individual life and 19.5 per cent for group life.

This demonstrates the industry’s potential to become a major mobiliser of long-term capital.

Insurance companies collect premiums today to meet obligations that may arise years later. Properly regulated, those funds can support long-term investment in government securities, infrastructure and other permitted assets.

That makes insurance more than a protection business.

It can also be an important source of investment capital for an economy seeking to finance infrastructure and productive activity. But size alone is not enough

Despite the growth in premiums, the industry continues to face structural weaknesses. One is limited capacity to retain very large and specialised risks.

NAICOM’s Q2 2026 data showed that the industry retained an average 65.9 per cent of premiums. Life insurance had a much higher retention rate of 86.7 per cent, while non-life was 56.4 per cent. Oil and gas recorded only 30.9 per cent retention, reflecting the difficulty of retaining some large and specialised risks domestically. That means substantial portions of certain risks still have to be transferred to reinsurers, particularly where domestic capacity is insufficient.

This is one reason recapitalisation matters. The second big recapitalisation

Nigeria has now entered another major chapter. The signing of the Nigerian Insurance Industry Reform Act, NIIRA 2025, in July 2025 represented the biggest overhaul of the sector’s legal framework in more than two decades.

The law consolidated several existing insurance laws and introduced a more flexible framework covering capital, supervision, policyholder protection, compulsory insurance, microinsurance, takaful, agricultural insurance, technology, corporate governance and market conduct.

The law also introduced a risk-based approach to capital.

Instead of relying simply on a uniform capital requirement, the emerging regulatory framework seeks to align capital more closely with the risks individual insurers carry.

NAICOM chief executive officer, Mr Ayo Omosehin, said in June 2026 that it had appointed Ernst & Young as consulting actuary for the finalisation and implementation of the Risk-Based Capital framework. Then came the recapitalisation exercise.

In August 2026, NAICOM announced the completion of the 12-month exercise, saying 43 insurance and reinsurance companies had successfully met the prescribed minimum capital requirements, while eight companies that submitted evidence close to the deadline were undergoing final verification.

The regulator subsequently began issuing new licences to compliant operators.

For NAICOM, the exercise is expected to improve insurers’ ability to absorb larger risks, meet policyholder obligations, invest for the long term and compete in regional and international markets.

This is a significant development at 66.

The industry is entering its next phase with stronger capital, a new legal framework and a regulatory shift towards risk-based supervision.

The technology question

Technology could become the bridge between Nigeria’s huge population and its relatively small insurance market.

Digital platforms can reduce distribution costs and make it easier for customers to buy policies, renew them, make payments and submit claims.

The opportunity is particularly significant for microinsurance.

A farmer may not need a complicated annual policy sold through a traditional branch. A motorcycle operator may need affordable accident cover. A trader may require protection against fire or theft. A low-income household may need a simple life or health-related protection product.

The future therefore lies partly in designing insurance around people’s actual economic lives rather than expecting everyone to buy traditional products.

NIIRA 2025 explicitly recognises microinsurance, takaful and agricultural insurance and provides for technology and innovation within the regulatory framework. It also recognises the role of fintechs and insurtechs in the distribution ecosystem.

What lies ahead

The next chapter will ultimately be determined not by how many insurance companies Nigeria has, but by how many Nigerians and businesses are adequately protected. The first priority is trust.

A customer who buys a policy must understand what is covered, what is excluded, how much will be paid and how claims will be processed.

The second is enforcement.

Nigeria already has compulsory insurance requirements, but NAICOM has acknowledged that enforcement remains suboptimal. The new law seeks stronger enforcement, including expanded third-party motor insurance provisions and requirements affecting government assets and employees.

The third is affordability.

Insurance products must reflect the realities of a population where incomes vary sharply and millions operate small businesses. The fourth is capacity.

Recapitalisation should enable insurers to underwrite larger infrastructure, energy, aviation, marine, construction and industrial risks. But capital must be accompanied by stronger underwriting discipline and risk management. The fifth is technology.

Digital distribution, artificial intelligence, automated claims processing, mobile payments and data analytics can make insurance cheaper and more accessible, provided customer protection keeps pace.

There is also a growing need for insurance against emerging risks, cybercrime, climate-related disasters, business interruption, agricultural losses and other risks associated with a rapidly changing economy.

At independence, Nigeria’s insurance industry was largely a foreign-dominated commercial service operating in a small formal economy.

Today, it is a multi-trillion-naira financial sector with thousands of professionals and businesses, a regulatory architecture headed by NAICOM, growing life and annuity business, expanding digital distribution and a renewed capital base.

The transformation is substantial.

But the industry’s greatest opportunity is still ahead.

NAICOM’s Q2 2026 figures put total insurance industry assets at N5.52 trillion, up 25.6 per cent from N4.4 trillion a year earlier. Non-life accounted for N3.25 trillion, while life insurance accounted for N2.28 trillion. Those figures show an industry that has moved far beyond its modest beginnings.

Yet, the 0.5 per cent penetration figure cited by NAICOM also shows how much remains untapped.

At 66, therefore, Nigeria’s insurance story is neither one of failure nor completion.

It is a story of evolution, from colonial agencies to indigenous ownership; from weak regulation to NAICOM; from fragmentation to consolidation; from traditional policies to life, annuity, microinsurance, takaful and digital products; and now from conventional capital rules to risk-based supervision.

The industry has survived economic crises, currency shocks, regulatory upheavals, technological disruption and changing consumer behaviour.

Its next challenge is more fundamental: turning insurance from something many Nigerians encounter only when the law demands it into an everyday financial tool for protecting families, businesses and national assets.

If the new law delivers stronger enforcement, the recapitalised companies deploy their capital prudently, claims are settled faster, technology widens access and insurers win back public confidence, insurance could play a much larger role in Nigeria’s economic future.

After 66 years of independence, the industry has accumulated the institutions, experience and capital to take that next step.

The real test now is whether it can move from a market with enormous potential to one that actually protects the enormous population and wealth that Nigeria has built.