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Dear Esteemed Client,
On July 31, 2025, President Bola Ahmed Tinubu, GCFR, signed the Nigerian Insurance Industry Reform Bill 2025 into law, now known as the Nigerian Insurance Industry Reform Act (NIIRA or the “Act”) 2025. This landmark legislation marks a major turning point in the evolution of Nigeria’s insurance industry. It introduces a unified legal framework, repealing outdated laws, consolidating regulations to improve clarity as well as enforcement, strengthening policyholder protection, and boosting overall industry performance.
This legislative reform is a significant part of the broader drive to redefine and position the insurance sector as a key contributor to Nigeria’s journey toward a $1 trillion economy.
Key Highlights of the NIIRA 2025
1. Increased Minimum Capital Requirements: To bolster the underwriting capacity of insurers and reinsurers and protect policyholders’ interests, the Act introduces higher Minimum Capital Requirements (MCR) of ₦10 billion, ₦15 billion and ₦35 billion for life insurers, non-life insurers and reinsurers respectively, as well as a shift to Risk-Based Capital (RBC) framework for insurers/reinsurers based on quantum of risks undertaken. The new MCR became effective on July 31, 2025, and as such, all operators are required to comply fully within twelve (12) months from the effective date, and no later than July 30, 2026, as directed by NAICOM in a recent Circular.
2. Expansion of Compulsory Insurances: Existing compulsory insurances, such as motor, group life, and public liability insurance, would be rigorously enforced to protect individuals, businesses, and the broader public. The Act introduces the petroleum and gas products third-party compulsory insurance, requiring all petroleum and gas filling stations, as well as vehicles used in the transportation of petroleum and gas products, to be insured against third-party losses. Additionally, it mandates all assets and employees of the Federal Government and its agencies to be insured against specified hazards and perils. However, motor vehicles operated by the Nigerian Armed Forces and the Governments of foreign states are exempted from the compulsory Motor Vehicle (Third Party) Insurance.
3. Digitalization of Insurance Services: The Act promotes the digitalization of insurance products and services, encouraging insurers to adopt technology that makes insurance purchase, renewal, and claims processing faster and more accessible online.
4. Zero Tolerance for Delays in Claims Payments: The law makes comprehensive provisions on claims settlement aimed at ensuring that claims are processed promptly, delivering faster settlements and greater satisfaction for policyholders. An insured may request the Commission to settle an admitted but unpaid claim using the statutory deposit of the insurer.
5. Establishment of Insurance Policyholders Protection Fund: The law introduces an Insurance Policyholders Protection Fund (the “Fund”), which is established to be independently managed and separate from both the Commission and the Government. The Fund is designed to protect policyholders in the event of an insurer’s or reinsurer’s insolvency or license cancellation. It will be funded through contributions from gross premiums of insurance and reinsurance companies, as well as from the balance of the Commission’s Security and Insurance Development Fund (SIDF).
6. Regional Insurance Integration: The Act expands participation in regional insurance schemes by establishing a National Bureau on the Ecowas Card Scheme. This allows the issuance of ECOWAS Brown Card to licensed and participating motor vehicles (third-party liability insurance) underwriters, which allows motor insurance coverage and claims settlement to be honoured across borders within the West African region.
What This Means for Policyholders
With the NIIRA 2025 in effect, policyholders can look forward to an insurance Industry that is more transparent, responsive, and secure. The Act introduces stringent penalties for non-compliance, aimed at promoting fair treatment, reducing systemic risk, and building greater trust and confidence in the insurance system.
There would be increased protection for policyholders through stronger oversight of insurers by the regulator, improved claims turnaround, broader compulsory coverage, and easier access to digital insurance platforms. In addition, new safeguards, such as the Insurance Policyholders Protection Fund, will provide additional security to ensure that claims are paid if an insurer becomes insolvent, giving policyholders peace of mind. In addition, the Risk-Based Capital (RBC) requirement for (re)insurers will guarantee that the companies hold adequate capital in proportion to the level of risk they take on, ensuring greater financial stability and protection for policyholders.
Proactively, the National Insurance Commission has released a circular dated August 12, 2025, announcing the commencement of the new recapitalization exercise, and all insurers and reinsurers are expected to comply with the new capital requirements (MCR or the RBC determined by the Commission) by July 30, 2026. This exercise may culminate in the exit or merger of some insurance companies, ensuring that only insurers with adequate financial capacity remain.
At Insurance Brokers of Nigeria, we are committed to supporting and guiding you, our clients, through this new era in insurance, ensuring you receive the maximum benefit from the coverage purchased.
If you have any questions on how the reforms impact your insurance program and operations, please do not hesitate to contact us.
Thank you.