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From Adanna Nnamani, Abuja
Nigeria’s insurance industry is entering a new phase following the successful completion of its recapitalisation exercise, which produced a capital base of N1.079 trillion, raising expectations that the sector will play a bigger role in financing economic activities, supporting businesses and stimulating national development.
The development represents a major shift for an industry that has struggled for years with inadequate capital, limited capacity to retain large risks, low public confidence and weak insurance penetration.
With 48 insurance companies and two reinsurance firms meeting the new minimum capital requirements and securing fresh licences, the industry is expected to have a stronger financial foundation to compete for bigger risks, support major investments and provide more reliable protection to individuals and businesses.
However, the real significance of the exercise will depend on what the industry does with its stronger capital base. Beyond the headline figure, insurers must demonstrate that the new financial strength can translate into greater investment in the economy, improved claims settlement, wider insurance coverage and stronger confidence among policyholders.
For an economy seeking to expand infrastructure, attract investment, grow businesses and create jobs, a stronger insurance industry could become an important source of long-term financial support.
A new financial foundation
The recapitalisation exercise was undertaken under the Nigerian Insurance Industry Reform Act (NIIRA) 2025, which was signed into law by President Bola Tinubu on July 31, 2025.
The 12-month exercise, which closed on July 31, 2026, was designed to strengthen the financial position of insurance operators, improve their ability to absorb risks and create a more resilient industry.
Announcing the successful completion of the exercise, the National Insurance Commission (NAICOM) described it as a major step towards building a stronger, more resilient, adequately capitalised and professionally governed insurance sector.
The Commissioner for Insurance and Chief Executive Officer of NAICOM, Olusegun Ayo Omosehin, disclosed that the exercise produced total industry capital of N1.079 trillion, with 48 insurance companies and two reinsurers meeting the new requirements and securing relicensing.
About 24 insurance companies raised fresh capital to meet the requirements, while others relied on existing capital already available to them. Funds raised by operators were domiciled in escrow accounts with the Central Bank of Nigeria (CBN), pending verification and regulatory approval.
This distinction is important. The N1.079 trillion represents the aggregate capital outcome of the exercise, rather than one pool of fresh money available for government or businesses to access. It reflects the stronger capital positions achieved by operators, including new funds raised by companies that needed additional resources.
The exercise was not without consequences for the market. Six operators lost their licences after failing to meet the prescribed requirements, while the remaining companies emerged with stronger capital positions and renewed regulatory obligations.
For NAICOM, the objective was not simply to increase the amount of money on insurance companies’ balance sheets but to improve their capacity to protect policyholders and support the wider economy.
Financing infrastructure and energy projects
One of the most significant opportunities created by the recapitalisation is the prospect of greater participation by Nigerian insurers in financing major infrastructure and energy projects.
Nigeria has substantial financing requirements across roads, bridges, railways, power generation, transmission infrastructure, ports, airports and other public assets. The scale and long-term nature of these projects require financial institutions capable of supporting large investments and managing risks over extended periods.
Insurance companies, because of the long-term nature of some of their liabilities and investment obligations, can play an important role in mobilising funds for such projects.
They can participate through infrastructure bonds, government securities, project-related investments and other regulated investment instruments. They can also provide insurance cover for construction, equipment, liability, engineering and operational risks associated with major projects.
A stronger capital base should improve the ability of local insurers to underwrite larger portions of these risks rather than relying heavily on foreign insurers and reinsurers.
This is particularly relevant to Nigeria’s oil and gas industry, where exploration, production, pipelines, offshore operations and energy infrastructure involve substantial financial exposure.
The same opportunity exists in power generation and distribution, where equipment failure, fire, machinery breakdown, construction delays and other operational risks can result in significant losses.
If local insurers can retain more of these risks, a greater proportion of insurance premiums and related financial activities could remain within the Nigerian economy.
Speaking at the 2026 BusinessDay Insurance Conference in Lagos, Omosehin said the industry must move beyond measuring success by the volume of capital raised.
“The true purpose of capital is to create capacity; the capacity to underwrite risks, the capacity to pay claims, the capacity to innovate, the capacity to inspire confidence, and ultimately, the capacity to support economic growth and national prosperity,” he said.
He added that the industry must develop the capacity to underwrite major infrastructure projects, retain more risks within the domestic market and create products that address emerging risks.
The implication is that the recapitalisation should enable Nigerian insurers to compete more effectively for businesses that previously required substantial foreign participation.
Supporting agriculture and food security
Agriculture is another sector where a stronger insurance industry could contribute meaningfully to economic growth.
Despite employing a significant proportion of Nigeria’s workforce and contributing to national output, the sector remains exposed to unpredictable weather, flooding, drought, pests, diseases, insecurity and other risks that affect farmers’ incomes and investment decisions.
Many smallholder farmers operate without adequate insurance protection. When crops fail or livestock are lost, they often absorb the financial consequences themselves, making it difficult to recover or secure financing for another planting season.
A stronger insurance industry could help address this gap through more accessible agricultural insurance products.
Insurers could develop policies covering crop losses, livestock mortality, farm equipment, storage facilities and agricultural processing activities. Weather-indexed insurance, which uses measurable weather conditions to determine payouts, could also help reduce the cost and administrative burden associated with assessing individual farm losses.
With appropriate partnerships involving government agencies, agricultural lenders, cooperatives, technology companies and development institutions, insurers could extend coverage to more farmers.
The benefits would go beyond compensation after losses. Insurance can also improve farmers’ access to credit because lenders are more likely to finance borrowers whose investments are protected against major risks.
For commercial farmers and agribusinesses, better insurance coverage could encourage investment in mechanisation, irrigation, processing, storage and distribution.
The new capital base should therefore create room for insurers to take a more active role in developing products that respond to the risks facing Nigeria’s agricultural economy.
A lifeline for small businesses
Small and medium-sized enterprises (SMEs) are central to Nigeria’s economy, providing employment and supporting commercial activities across different sectors.
Yet many small businesses remain vulnerable to fire, theft, accidents, business interruption, equipment damage, cybercrime and other unexpected events.
A single major incident can destroy years of investment, force a business to close or push its owners into debt.
Insurance can provide a financial safety net, allowing businesses to recover from losses and continue operating. It can also make businesses more attractive to lenders and investors by reducing some of the risks associated with their operations.
However, the cost, complexity and limited awareness of insurance products have discouraged many small businesses from obtaining adequate coverage.
With stronger capital, insurers should be better positioned to develop affordable and flexible products for this segment of the economy.
Microinsurance, digital distribution channels and simplified claims processes could help extend coverage to traders, artisans, transport operators, small manufacturers and informal businesses.
For instance, a market trader could obtain affordable cover against fire and theft, while a small manufacturer could insure equipment and protect against business interruption.
The industry could also work with banks, fintech companies, trade associations and cooperative societies to distribute products to customers who may not ordinarily approach an insurance company.
Such partnerships would help insurers expand their customer base while providing businesses with greater financial security.
The challenge of low insurance penetration
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Despite the opportunities, Nigeria’s insurance industry still faces a major challenge: a relatively small proportion of the population and businesses have adequate insurance protection.
Low public awareness, affordability concerns, limited distribution channels, distrust arising from claims disputes and a strong preference for paying out of pocket have continued to constrain the market.
The OECD’s Africa Capital Markets Report 2025 highlighted the limited scale of the continent’s insurance market, noting that Africa accounted for about 0.9 per cent of global insurance premiums in 2023. It also observed that five countries, including Nigeria, accounted for 87 per cent of the continent’s premiums.
The report underscored the role of insurers and pension funds as institutional investors capable of mobilising long-term funds for productive assets. However, low insurance penetration limits the resources available to the sector for such investments.
For Nigeria, this means that increasing capital alone will not automatically create a larger insurance market.
Insurers must build products around the needs and purchasing power of Nigerians, particularly low-income households and people working in the informal sector.
Health, life, motor, agricultural and property insurance products could be made more accessible through flexible premiums, digital platforms and partnerships with organisations that already have large customer networks.
The industry must also address the perception that insurance companies are quick to collect premiums but slow to pay claims.
Claims settlement: The real test of reform
Public confidence remains one of the most important conditions for the growth of insurance in Nigeria.
For many Nigerians, the value of an insurance policy is determined not by the number of products advertised or the size of an insurer’s capital but by whether the company pays when a legitimate claim is made.
Delayed payments, disputed claims and complicated procedures can discourage existing policyholders from renewing their policies and prevent potential customers from buying insurance.
The recapitalisation therefore presents an opportunity for operators to improve claims management, invest in technology, strengthen internal controls and provide better customer service.
Omosehin has emphasised that policyholder protection must remain central to the regulator’s work.
“Protecting policyholders remains the primary duty of the regulatory authority,” he said.
At the 2026 BusinessDay Insurance Conference, he also described claims payment as one of the most visible demonstrations of insurance value, warning that the industry must ensure its stronger financial position translates into better service.
“The true test of any insurance company is not how many policies it sells. The true test is how effectively it responds when policyholders need support,” he said.
For insurers, prompt and transparent claims settlement should become a central part of their business strategy. Companies that demonstrate reliability are more likely to retain customers, attract new policyholders and build sustainable businesses.
Technology can support this process through digital claims submission, automated assessment, improved fraud detection and faster communication with customers.
However, technology must complement effective management and adequate financial resources. A digital platform cannot compensate for weak governance or an unwillingness to honour legitimate claims.
Technology and innovation
The stronger capital base also creates an opportunity for insurers to invest more in technology and innovation.
Digital insurance platforms can make it easier for customers to compare policies, purchase cover, renew premiums and submit claims without visiting physical offices.
Data analytics and artificial intelligence can help companies assess risks more accurately, detect fraudulent claims and develop products suited to different customer groups.
For example, insurers could use data to design motor insurance products that reflect driving behaviour, while agricultural insurers could use satellite information and weather data to improve risk assessment.
Technology could also help operators reach people in rural communities and informal markets where traditional insurance distribution channels are limited.
However, investment in technology must be accompanied by stronger cybersecurity, data protection and consumer safeguards.
As insurance services become increasingly digital, companies will need to protect customers’ personal and financial information against cyberattacks and misuse.
The opportunity is significant, but operators must ensure that innovation improves accessibility and service delivery rather than simply increasing operational costs.
Omosehin urged insurers to embrace innovation, noting that consumers increasingly expect convenience, speed, transparency and simplicity in their dealings with service providers.
“In today’s world, innovation is no longer optional; it is the currency of relevance,” he said.
Making the capital work
While the recapitalisation has strengthened the industry’s financial foundation, the next phase will require disciplined investment, sound corporate governance and effective regulation.
Omosehin warned against measuring the success of the exercise solely by the amount of money raised.
“Recapitalisation was never intended as an end in itself. Capital without capacity is merely a number on a balance sheet,” he said.
That warning is particularly important as insurers consider how to deploy their stronger financial resources.
Companies must balance investment in long-term assets with their responsibility to maintain sufficient liquidity to meet claims and other obligations. They must also avoid excessive exposure to risky investments or aggressive underwriting practices that could weaken their balance sheets.
NAICOM, on its part, will have to ensure that operators maintain adequate capital, observe sound investment rules and comply with governance and risk-management standards.
The regulator’s shift towards risk-based supervision will be important in ensuring that capital requirements reflect the risks and complexity of individual businesses.
The commission must also monitor the financial health of operators after the exercise and ensure that the new capital translates into sustainable operations.
The withdrawal of six licences has already demonstrated that the regulator is prepared to enforce compliance. However, the longer-term success of the reform will depend on consistent supervision and transparent enforcement.
A stronger industry, but more work ahead
The recapitalisation has undoubtedly created a new financial foundation for Nigeria’s insurance industry. The N1.079 trillion aggregate capital achieved, alongside the relicensing of 48 insurers and two reinsurers, represents a significant milestone in the sector’s development.
But the bigger opportunity lies in what this stronger industry can contribute to the wider economy.
Insurers must become more active in supporting infrastructure development, energy projects, agriculture, manufacturing, small businesses and other productive sectors. They must also improve their capacity to retain risks locally, develop accessible products and settle legitimate claims promptly.
For government, the challenge is to create an environment that encourages investment, strengthens the enforcement of compulsory insurance laws and promotes public awareness of the benefits of insurance.
For the regulator, the task is to ensure that the capital raised is supported by effective governance, prudent investment and strong consumer protection.
And for insurance operators, the next phase is about proving that the reform has produced more than stronger balance sheets.
The industry now has a greater opportunity to become a dependable source of long-term capital, risk protection and financial stability.
Ultimately, the success of the N1.079 trillion recapitalisation will not be determined by the amount announced at the end of the exercise. It will be measured by the number of businesses protected, the size of risks Nigerian insurers can retain, the investments they support, the claims they pay and the millions of Nigerians they bring into the insurance system. That is when the recapitalisation will begin to deliver its full value to the economy.
