By David Akinmola
A proposal to exempt foreign insurance companies from paying tax on premiums generated from insurance business written in Nigeria has triggered concern in the insurance industry.
Operators are warning that such a move could undermine ongoing industry’s reforms and weaken local capacity in the market.
Industry stakeholders say the proposal attributed to recommendations under review by KPMG could incline the competitive landscape sharply against Nigerian insurers at a time when the industry is grappling with rehabilitation, low penetration, and weak public confidence.
They argue that granting tax exemptions to foreign insurers while local companies continue to bear the full tax burden would erode the very foundation of reforms aimed at building a strong, resilient domestic insurance market.
At the heart of the concern is the suggestion that exempting foreign insurers from tax on premiums sourced from Nigeria could help deepen insurance penetration. Local operators, however, insist that such an approach risks sacrificing long-term sector development for short-term gains.
Speaking specifically on the development at the weekend in an interview with The Guardian, the former Chief Executive of FSL Insurance Broker Limited, Alfred Daudu, said the proposal, if implemented, would amount to “penalizing Nigerian insurers in their own market.”
According to him, “You cannot be asking local companies to recapitalize, comply with stricter regulations and still pay full taxes, whilst foreign firms are given tax holidays to compete for the same risks. It is not reform, it is market distortion.”
Nigeria’s current policy on foreign observance is designed to protect local capacity, ensure value retention within the economy, and promote a level playing field. Industry players note that the policy also supports job creation, skills development, and the growth of local underwriting expertise. Weakening this framework, they argue, could reverse hard-won gains.
Daudu explained that while foreign insurers play an important role, especially in large or specialised risks, tax parity remains essential. “Foreign participation should complement, not cripple, domestic insurers. If foreign companies are allowed to underwrite Nigerian risks tax-free, local firms will struggle to compete on pricing, and many could be forced out,” he said.
The concerns come at a sensitive time for the sector. The National Insurance Commission (NAICOM) is implementing a far-reaching recapitalisation program aimed at strengthening insurers’ balance sheets and improving claims-paying capacity.
Operators are required to raise significantly higher capacity, a process that has already placed pressure on weaker firms.
Industry observers say introducing tax advantages for foreign insurers in the middle of the industry reform transition could worsen capital flight and reduce incentives for local investment. “Insurance premiums are long-term funds. If more of these premiums are written offshore and taxed lightly or not at all, Nigeria loses not just revenue but the opportunity to build institutional capital,” they said.
Beyond the insurance sector, stakeholders warn that the proposal could have broader implications for Nigeria’s development agenda. Insurance is a critical enabler of economic growth, providing risk protection for infrastructure, manufacturing, agriculture, and small businesses.
A weakened domestic insurance market, they argue, would reduce the country’s ability to support these sectors sustainably.
Commenting on the tax breaks for foreign firms, the Managing Director, IBTC Insurance, Akinjide Orimolade, said that deepening insurance penetration requires more than tax incentives. “Penetration grows when people trust insurers, when claims are paid promptly, and when products are tailored to local needs. That comes from strong local institutions, not from tax exemptions for foreign firms,” he said.
He added that rather than eroding tax protections for domestic insurers, policy focus should be on enforcing compulsory insurance, expanding financial literacy, and improving regulatory oversight.
While acknowledging KPMG’s role as a respected advisory firm, industry leaders say reforms must be aligned with Nigeria’s realities. “Global best practices cannot be applied mechanically; Nigeria is still building insurance capacity. Policies must reflect that stage of development,” another executive said.
For now, stakeholders are urging policymakers to tread carefully and engage the industry fully before considering any changes to the tax treatment of foreign insurers. As one operator put it, “e-forms should strengthen local players to compete globally, not weaken them at home.”
As debate around the proposal continues, the consensus within the industry remains firm; any reform that undermines domestic insurers risks slowing the growth of insurance penetration and weakening a sector critical to Nigeria’s economic resilience.
