COMPLIANCE ALERT: INSURANCE COMPANIES AT RISK OF LICENCE REVOCATION OVER RECAPITALISATION NON-COMPLIANCE

Introduction

On the 31^st of July 2025, the President assented to the enactment of the Nigerian Insurance Industry Reform Act (NIIRA) 2025 as the governing law for insurance practices and operations within the industry. The Act repeals several provisions and introduces a new Minimum Capital Requirement (MCR) and a Risk-Based Capital (RBC) requirement for all insurance and reinsurance companies.  Following the enactment of the Act, on 12^th August 2025, the National Insurance Commission (NAICOM) (‘the Commission’) issued a press release informing insurance and reinsurance companies and stakeholders of the requirements of the new Act, the procedure for compliance, and the intention to implement as at when due. By the press release, stakeholders within the insurance industry were required to evaluate their companies to ensure compliance.

This newsletter examines the recapitalisation requirement of the Act and NAICOM’s implementation against non-compliance with the requirement.   

Compliance with the NIIRA 2025  

Pursuant to section 15(1) of NIIRA 2025, the Act introduces a Minimum Capital Requirement (MCR) of N15,000,000,000 (Fifteen Billion Naira) for non-life insurance, N10,000,000,000 (Ten Billion Naira) for life insurance, and N35,000,000,000 (Thirty-Five Billion Naira) for reinsurance companies. While the risk-based capital is determined by considering the Insurance risk, market risk, credit risk, and operational risk and applying such capital charges on assets and liabilities as shall be determined. The MCR is to take effect immediately upon the Act being enacted and requires all insurers and reinsurers to comply with the MCR requirements within 12 months period, on or before the 30^th day of July 2026. (sub-section 6) 

To comply with the capitalisation exercise, the Commission is tasked to provide the guidelines in relation to the composition of the MCR, the acceptable forms of capital, the procedures for capital verification, the qualifying assets for MCR purposes and criteria such as title, ownership, and existence, and the standardised template for computation of MCR. However, MCR that is composed of the net assets of the company must be unencumbered, with perfected title of the company and within the prudential threshold to be admissible as a verifiable asset. According to the press release, all assets for the purpose of the new MCR shall be subject to verification by the Commission or its appointed agents. The Commission may also undertake further verification where the circumstances or nature of an asset deems it necessary.  

Upon fulfilment of the new MCR, payment of the requisite fees and confirmation by the Commission, the successful insurance and reinsurance company shall be issued new license certificates by the Commission.  

Revocation of license  

According to section 5(3) (b) of NIIRA 2025, an insurer or reinsurer cannot be licensed unless the company, while carrying out its business, has maintained the required minimum capital prescribed by the Commission. Therefore, any company that fails to meet the prescribed MCR within the stipulated timeframe shall be subject to liquidation, merger, or any other regulatory resolution action as may be deemed appropriate by the Commission. The Act provides that the Commission shall give notice of its intention to cancel the license of the insurer and provide a thirty (30) day remedy period within which the company may remedy any breach or defect regarding the notice issued. Section 8(1)(l) and (2) NIIRA 2025. 

Following the cancellation of license, the insurer or reinsured company goes into liquidation, and the Commission is empowered to act as the receiver or appoint a receiver or provisional operator to settle the outstanding liabilities of the company. In winding up the company, the receiver/manager is required to: 

1. Trace, recover, secure & take over assets of the company

2. Administer the assets as expeditiously as possible for the benefit of the policyholders, clients and creditors of the insurance operator.

3. Expedite the transfer of the company’s life insurance portfolio to another life insurer subject to the Commission’s approval.

4. Deliver periodic progress reports to the Commission on the liquidation of the company.

Section 110(1) NIIRA 2025. 

Upon the cancellation of the insurance license, an insurer may begin an action at the Federal High Court within a reasonable time from the date of cancellation. Section 8(9) of NIIRA 2025. Thus, NICON Insurance has reportedly challenged the revocation of its license in a procedural court and the allegations of non-compliance remain inconclusive as the matter is pending at the Federal High Court. 

Conclusion  

The statutory compliance deadline ending on the 30^th day of July 2026 has expired. However, insurers and reinsurers remain within the applicable remedy period and should treat the matter with urgency. Non-compliance may expose affected companies to regulatory action, including cancellation of their licences and subsequent liquidation, merger, or other resolution measures by NAICOM 

Insurance and reinsurance companies are encouraged to urgently review their compliance status, assess the adequacy and eligibility of their capital and assets, and take appropriate steps to address any outstanding requirements. Where uncertainties or compliance gaps arise, affected companies should seek appropriate legal and regulatory guidance to navigate the requirements and available remedial measures. 

This newsletter by Manifield Solicitors is provided for general information purposes only and does not constitute legal, regulatory, or professional advice. While reasonable care has been taken in preparing this publication, readers are advised not to rely on its contents as a substitute for specific legal advice. Institutions and individuals are encouraged to consult their legal, compliance, or other professional advisers before acting on any information contained in this publication.