The Nigerian insurance industry is set for a major overhaul as the National Assembly has proposed stringent penalties for unlicensed operators. A key provision of the Nigeria Insurance Industry Reform Bill, 2024, stipulates a hefty fine of ₦25 million for individuals found operating without the requisite license.
Under the proposed legislation, engaging in insurance business without obtaining a license will be a serious offense, punishable by either a ₦25 million fine or a two-year prison term, or both. This represents a significant escalation from the previous penalty of ₦250,000 under the Nigeria Insurance Act of 2003.
For corporate entities violating the same law, the consequences are even more severe. Principal officers of such companies face a hefty fine of ₦50 million each, in addition to a potential two-year jail term.
Insurance Industry Reform Bill
The insurance industry bill aims to establish a robust regulatory framework for the insurance industry. It mandates that insurance companies must be incorporated as limited liability companies under the Companies and Allied Matters Act or established through other legal means. This measure ensures that only legitimate entities can participate in the insurance market.
Stringent Licensing and Compliance Requirements
Insurers operating within the Nigerian insurance landscape will be required to adhere to sound insurance principles, prioritizing risk management, financial stability, and industry best practices. The Nigerian Insurance Commission (NAICOM) will have the power to revoke licenses of insurers that fail to meet these standards.
Grounds for license cancellation include insolvency, inadequate capital, cessation of business operations, and fraudulent activities. Once a license is revoked, the insurer is prohibited from underwriting new policies, and NAICOM may be appointed as a receiver to manage the company’s affairs.
Read Also: Nigeria Now Second Most Food-Insecure Nation Globally
If You Ask Me: Industry Implications and Consumer Protection
The proposed reforms are expected to have a profound impact on the Nigerian insurance industry. By imposing stricter penalties on unlicensed operators and enhancing regulatory oversight, the bill aims to protect consumers from fraudulent activities and ensure the financial stability of insurers.
The increased capital requirements and stringent compliance standards may lead to consolidation within the industry as smaller players struggle to meet the new regulations. However, the long-term benefits of a well-regulated and transparent insurance market are expected to outweigh the short-term challenges.