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By Henry Uche
One major concern among Nigerians with bank accounts or insurance policies is the persistent fear of insolvency, a situation where financial institutions collapse, prompting regulators to revoke their licenses and appoint liquidators to oversee their winding down.
In the insurance industry, this concern is far from unfounded. Over the years, several insurance companies have folded up, leaving policyholders stranded and confidence in the sector shaken. Currently, one such company is under interim management appointed by the National Insurance Commission (NAICOM), the regulatory authority overseeing Nigeria’s insurance industry.
The latest case is that of African Alliance Insurance Plc (AAI), one of Nigeria’s oldest life assurance providers.
On October 30, 2024, NAICOM exercised its statutory powers by dissolving the company’s Board and Management, following a prolonged period of financial instability and unfulfilled obligations to policyholders and annuitants.
The Commission explained that the decision was taken after an extensive review of the company’s financial condition, governance practices, and operational performance, which revealed deep-rooted weaknesses threatening its ability to operate sustainably.
NAICOM stated in a document that its decision to intervene in the operations of African Alliance Insurance Plc was based on a comprehensive review of the company’s financial health, governance, and operational practices. The regulator affirmed that an in-depth assessment revealed serious concerns about the company’s ability to continue transacting business sustainably, particularly regarding its long-standing challenges of claims settlements and annuitant payments, which had caused considerable uncertainties and shaken public confidence in the insurer.
The Commission therefore appointed Dr. Haruna Mustapha as Chairman and Mr. Jacob Erhabor as Managing Director/Chief Executive Officer, alongside other executive and non-executive directors, to manage the affairs of the company and restore its financial health.
At a seminar recently organized by NAICOM in Ogun State for insurance correspondents, the Commissioner for Insurance, Mr. Olusegun Ayo Omosehin, declared that the Commission had paid all outstanding debts to annuitants of African Alliance Insurance Plc to date, noting that no single customer was being owed. “The Commission has paid all outstanding debts to annuitants of African Alliance to date. No kobo is owed to any customer of the company,” Omosehin stated.
He explained that NAICOM’s intervention was aimed at protecting the interests of annuitants, policyholders, and other stakeholders, as well as stabilizing the broader insurance industry.
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According to him, the move was necessary to ensure that African Alliance returns to operational and financial compliance in line with regulatory standards.
Omosehin also highlighted a key development in the recently signed Nigerian Insurance Industry Act (NIIRA) 2025, which introduced a pro-policyholder provision known as the Policyholders’ Protection Fund (the Fund). Spelled out in Section 212 of the new law, the Fund was established to protect policyholders in cases of insurer insolvency.
The primary objective of the Fund is to provide financial protection for insurance policyholders by ensuring that outstanding claims are paid even when a licensed insurer or reinsurer becomes distressed, insolvent, or has its license revoked. Funding for the Policyholders’ Protection Fund is derived from a 0.25 percent contribution from the gross premium income of insurers and reinsurers, matched by another 0.25 percent contribution from the Security and Insurance Development Fund.
With this new provision, the NAICOM Chief assured Nigerians that they no longer need to fear for the safety of their insurance investments. He explained that the Fund would guarantee their returns on investment (ROI) and ensure that no policyholder suffers losses in the event of a company’s collapse. “With this Fund, potential and existing policyholders can be rest assured that their investments are safe,” Omosehin said.
However, he pledged that the Commission would continue to take proactive measures to prevent insurance companies from becoming insolvent. He reiterated that the payment of genuine claims remains sacrosanct to his administration and central to restoring public trust in the sector.
Omosehin also promised to work closely with all stakeholders, including annuitants, policyholders, employees, and investors, to minimize disruption and ensure continuity. He reaffirmed his commitment to maintaining the stability, transparency, and integrity of Nigeria’s insurance industry.
Reacting to the development, a Lagos-based property entrepreneur and policyholder, Mr. Sunday Okwute, expressed satisfaction with the new Fund provision in the insurance law. Okwute commended NAICOM’s proactive measures and urged Nigerians to support the Commission’s efforts. According to him, “If the NDIC can protect the wealth of bank account holders, similar protection should be given to insurance policyholders.”
“Policyholders’ Protection Fund is a welcome development. We’re excited. We pray it’s not a mere policy statement in a document, but one that must be respected and enforced. What Nigeria needs is assurance of their wealth entrusted in your hands. But as NAICOM has pledged, they should not wait till an underwriter goes insolvent. Everything should be in the interest of the policyholders, because without us, there is no company” he said.
Another insurance consumer, Ahmed Lukeman, a medium- size business man in Ibadan, was rather skeptical while expressing gladness over ‘The Fund’. He maintained that the Fund designated to protect Policyholders should in fact, be used in accordance with the provision of the law. He reminded NAICOM, Operators and other insurance stakeholders that it’s mistrust on the side of insurance service providers that led to lack of confidence in the system. This, he added, has downgraded and bruised insurance to nothingness in the eyes of millions of Nigerians.
“It is a good thing that NAICOM is leaving no stone unturned to ensure that the lost trust and confidence in insurance is restored in no time. ‘The Fund’ as it is, has boosted the level of trust and confidence of Nigerians, especially prospective policyholders, a bit, to ascertain that there is a backup somewhere for them should any expected or unexpected circumstance happen against them.
But NAICOM and operators alike must be very transparent, accountable and prompt in every step they take on behalf of Nigerians, particularly, insurance consumers” he cautioned.
