NAICOM building
N1.079tr capital base puts pressure on bigger risks, faster claims
By David Akinmola
Twenty-four insurance companies that raised fresh capital under the industry’s recapitalisation exercise are set to access about ₦300 billion held in Central Bank of Nigeria (CBN) escrow accounts, as the National Insurance Commission (NAICOM) shifts attention from capital raising to the operators’ ability to underwrite bigger risks, settle claims faster and expand insurance coverage.
The development marks the beginning of what could be a more consequential test of the year-long recapitalisation exercise, which has lifted the industry’s total capital to ₦1.079 trillion, according to the National Insurance Commission (NAICOM). The regulator has said the funds lodged with the CBN are expected to be returned to the respective companies by the end of September.
Of the 50 insurance and reinsurance companies that ultimately met the new minimum capital requirements, 24 raised fresh funds through capital-market transactions, while 26 were able to meet the thresholds from capital already available to them.
NAICOM’s Commissioner for Insurance and Chief Executive Officer, Olusegun Ayo Omosehin, disclosed the planned release of the funds at a media interactive session in Lagos, explaining that the use of the CBN escrow mechanism was part of the regulator’s effort to verify the source and eligibility of capital deployed during the exercise.
The release will effectively move the recapitalisation exercise from the capital-raising stage into the more demanding phase of capital deployment.
For insurers, the expectation is that the additional funds will enable them to retain more risks locally, participate in larger energy, infrastructure, aviation, marine and construction projects and reduce reliance on offshore capacity.
But NAICOM has already made clear that the success of the exercise will not be judged simply by the size of the new balance sheets.
In a paper delivered at the BusinessDay Insurance Conference in Lagos, Omosehin said the industry must now move “from capital to capacity,” stressing that the additional funds should translate into stronger underwriting, improved claims-paying ability, better customer service, innovation and greater public confidence.
The Nigerian Insurers Association (NIA) has also raised expectations for the post-recapitalisation period.
Its Chairman, Ebelechukwu Nwachukwu, said the stronger capital position should give insurers greater capacity to underwrite large and complex risks, expand compulsory insurance, provide long-term capital for infrastructure and deepen financial inclusion and digital transformation.
Nwachukwu has also stressed that the additional capital must ultimately translate into better service, faster claims settlement and increased public confidence, putting policyholders at the centre of the industry’s next phase.
The development is significant for a sector that has struggled for years with limited risk-retention capacity, low insurance penetration and heavy dependence on international reinsurance for major risks.
The higher capital base could therefore allow Nigerian insurers to take larger positions in sectors where individual risks have traditionally exceeded the financial capacity of domestic underwriters.
Energy, oil and gas, aviation, marine, construction and major infrastructure projects are among the areas where stronger balance sheets could enable operators to retain a greater share of premiums and risks within Nigeria.
However, greater capital also brings greater expectations from policyholders and investors.
The industry’s longstanding challenge has not been limited to capital adequacy. Public confidence has also been affected by concerns around claims delays, product relevance, affordability, distribution and the ability of insurers to demonstrate value to customers.
That is why the release of the escrow funds could become a defining point in the post-recapitalisation story.
NAICOM said the commission would continue to monitor how operators use their strengthened capital base, while its next major regulatory initiative is the implementation of the Risk-Based Capital (RBC) framework, which will align capital requirements more closely with the risks undertaken by individual insurers.
The commission has also urged newly capitalised companies to strengthen corporate governance, transparency, innovation and policyholder protection rather than treating the recapitalisation exercise as an end in itself.
The difference between the new capital and actual industry capacity could become particularly important as Nigeria seeks to retain more of its insurance premiums domestically.
A stronger local market could reduce the extent to which premiums from major Nigerian risks are transferred offshore, while allowing domestic insurers to play a bigger role in financing and protecting strategic economic assets.
For policyholders, however, the immediate expectation is more practical: whether stronger capital will result in quicker and more reliable claims payments, better products and improved service.
The recapitalisation has already changed the financial structure of the industry. The next test is whether the ₦1.079 trillion capital base can be converted into stronger insurers, larger risks retained locally, faster claims and a deeper market.
