N600bn capital injection expected on insurance bill passage
Pan-African credit rating agency Agusto&Co projected that insurers would pour in about N600bn to recapitalise their firms on the passage of the Nigeria Insurance Industry Reform bill.
This was revealed in its latest 2025 Nigerian Insurance Industry Report made available to The PUNCH.
The National Insurance Commission recently hailed the passage of the bill by the House of Representatives, months after it was passed by the Senate, describing it as a bill that would change the face of the game for the sector. The bill is currently awaiting presidential assent.
Agusto & Co said, “The Nigeria Insurance Reform Bill, which seeks to overhaul the industry’s regulatory framework is expected to be passed into law before December 31, 2025. We believe the bill would compel the National Insurance Commission to fast-track the transition to a risk-based capital regime (initiated over a decade ago). This legislation would significantly impact the industry’s capitalisation based on the planned increase in the minimum capital requirement for the various business segments in the bill.
“We anticipate circa N600bn capital injection by insurers to comply with the uptick in the minimum capital requirement and increase the underwriting capacity.
While insurers would be allowed to recapitalise over a period, we anticipate an uptick in activities to shore up the capital base in FY 2025. In our view, the recapitalisation exercise would shape risk underwriting activities in the near term as insurers seek to generate adequate returns for shareholders. Thus, we expect the adoption of innovation on the back of technology to drive insurance penetration and improved risk retention on the back of the enlarged capital base.”
The new Act repealed the Insurance Act, Cap 117, Laws of the Federation of Nigeria, 2004; the Marine Insurance Act, Cap M3, Laws of the Federation of Nigeria, 2004; the Motor Vehicle (Third Party) Insurance Act, Cap M22, Laws of the Federation of Nigeria, 2004; the National Insurance Corporation of Nigeria Act, Laws of the Federation of Nigeria, 2004; and the Nigerian Insurance Reinsurance Corporation Act, Cap N131, Laws of the Federation of Nigeria, 2004.
Reflecting on the 2024 financial year and industry performances, the firm said that insurance revenue is estimated to have crossed the N1tn mark to N1.1tn.
Highlighting the drivers for this growth, Agusto & Co said, “The industry benefitted from aggressive marketing activities and an upward review of premiums to reflect the prevailing inflationary pressure. The 40.9 per cent naira depreciation during the year under review bloated the premium from foreign currency-denominated policies and supported the insurance revenue.”
“It is expected that the insurance revenue will continue to go up this year due to a combination of factors.
“In FY 2025, we believe the insurance revenue will maintain the upward trajectory spurred by the uptick in compulsory insurance policies enforcement, increasing technology adoption in product distribution and recapitalisation activities. The increased spending on infrastructure development by the various tiers of government would also increase the revenue from underwriting the underlying risks.
The entrance of new players such as NPF Insurance Company Limited, CHI Life Assurance Limited and Capital Express Indemnity Insurance Limited would support the industry’s insurance revenue.”
However, profitability for the sector in 2025 doesn’t look promising according to Agusto & Co, mainly due to projected lower foreign currency revaluation gains.
The report read, “In FY 2025, we anticipate a decline in the industry’s profitability, largely due to the lower foreign currency revaluation gains. Thus, a reduction in the post-tax return on average equity to 22.8 per cent is expected. We believe that sustainable profit (excluding the volatile foreign currency revaluation gains) will maintain the upward trajectory, supported by stricter enforcement of compulsory insurance policies, more efficient product distribution and an enlarged capital base to support the insurance income.”
Agusto & Co said the expected stability of the exchange rate would moderate the foreign currency revaluation gains that have bloated the investment income and accounted for circa 50 per cent in FY 2023 and FY 2024.
