The Senate on Tuesday passed the Nigerian Insurance Industry Reform Bill, 2024.
In the capital requirement enshrined in the bill, a person shall not carry on insurance business in Nigeria unless the insurer has and maintains, while carrying on that business, certain minimum capital.
“In the case of non-life insurance business, the higher of — (i) ₦25,000,000,000.00, or risk-based capital determined from time to time by the Commission
“In the case of life assurance business, the higher of (i) ₦15,000,000,000.00,or risk-based capital determined from time to time by the Commission.
“In the case of reinsurance business, the higher of (i) ₦45,000,000,000.00, andrisk-based capital determined from time to time by the Commission,” the bill partly reads.
The bill also proposes a penalty of N25 million for individuals found operating unlicensed insurance businesses in the country.
The passage follows the adoption of the report by the Committee on Banking, Insurance, and Other Financial Institutions during Tuesday’s plenary session.
The report was presented by the committee’s chairman, Senator Abiru Adetokunbo (APC-Lagos).
According to the bill, any individual who engages in insurance business without the proper licensing will be liable to a fine of N25 million, a prison term of two years, or both.
What Transpired at Plenary
- Adetokunbo told lawmakers that the bill aims to consolidate various existing laws regulating insurance businesses in Nigeria, including the Insurance Act of 2003, the Marine Insurance Act, the Motor Vehicles Third Party Insurance Act, the National Insurance Corporation Act, and the Nigerian Reinsurance Corporation Act.
- According to Adetokunbo, the bill creates a robust legal and regulatory framework for the insurance sector, enabling it to contribute positively to Nigeria’s financial sector.
“The current insurance legislation is over two decades old and lacks provisions to address contemporary challenges and foster growth and innovation,” he said, adding that the former law hampered the industry’s global competitiveness.
- He urged the Senate to pass the bill in the interest of all types of insurance initiatives in Nigeria.
- However, Senator Jimoh Ibrahim (APC-Ondo) opposed the passage of the bill, highlighting that “the proposed minimum capital requirement of N45 billion for reinsurance businesses” should be removed due to Nigeria’s current economic situation.
- But the Deputy Senate President, Barau Jibrin, opined that “This Act, once it receives concurrence from the House of Representatives and assent from the President, will significantly contribute to shaping our economy for the better.”
NAN further quoted Jibrin as saying, “Economies are dynamic and constantly changing, so it is incumbent upon the authorities of every nation to update their legislation to align with contemporary realities.
“This is precisely what the passage of this legislation aims to achieve: to restructure the entire insurance ecosystem in line with current realities.
“I am confident that the country will benefit greatly when the law is eventually assented to.”
The lawmakers eventually passed the bill.
What You Should Know
The fine in the passed bill is a 100-fold increase from the N250,000 fine for a similar offense in the Nigerian Insurance Act of 2003.
- For companies or firms found guilty of the same offense, the penalty doubles, with principal officers of the organization facing fines of N50 million each, alongside the possibility of a two-year prison sentence.
- The Senate in July 2024 passed the for a second reading, to reform the insurance sector in Nigeria.
In determining the risk-based capital required, the bill states that the Insurance Commission shall take into consideration the capital for insurance risk, market risk, credit risk, and operational risk.