Regulation and Licensing of Insurers Under NIIRA 2025

At the end of July 2026, the deadline passed. For a year, every licensed insurer and reinsurer in Nigeria had been racing to raise capital under the Nigerian Insurance Industry Reform Act 2025 (NIIRA). The National Insurance Commission (NAICOM) published a list of companies it had verified as compliant, and in the weeks that followed, some insurers whose names sit on thousands of policy documents had their licences revoked, among them Universal Insurance, reports say. For a policyholder, it was the clearest lesson in why licensing law matters: the company on your policy is only as good as the licence behind it.

This article explains how insurers are licensed and supervised in Nigeria, what the new capital floors require, how intermediaries and reinsurers fit in, and what happens when an insurer is merged or wound up. It follows Indemnity, Subrogation and Contribution in Nigerian Insurance and ends with a look at the rights insurers themselves can assert against the regulator.

1. From Registrar to Commission: how state control grew

Nigerian insurance regulation grew in stages. The Insurance Companies Act 1961 created the office of Registrar of Insurance, with power to register insurers and cancel registration.¹ The Insurance Decree of 1976 renamed it the Director of Insurance and created a Chief Actuary to advise on technical matters.² The 1991 Decree changed little. The real break came in 1997, when the National Insurance Commission Decree replaced the one-person office with a corporate body, now the National Insurance Commission Act, Cap N53, LFN 2004.³

The Commission’s principal object is to ensure the effective administration, supervision, regulation and control of insurance business in Nigeria. Its listed functions include setting standards for the conduct of insurance business, approving premium and commission rates, protecting policyholders, beneficiaries and third parties, and regulating dealings between local insurers and reinsurers abroad.⁴ Insurance is on the Exclusive Legislative List, so only the National Assembly may legislate on it.⁵

The Insurance Act 2003 then carried the detailed rules until NIIRA repealed it.⁶ NIIRA states that where other laws conflict with it as they relate to insurance business, NIIRA prevails.⁷ The NAICOM Act is not among the laws repealed, so the Commission’s structure still comes from that Act while its substantive powers over insurers now come from NIIRA.

2. Who may carry on insurance business

Section 5(1) of NIIRA says no person may commence or carry on insurance, reinsurance or related business in Nigeria unless licensed by the Commission. To be licensed, an applicant must be a limited liability company under the Companies and Allied Matters Act or a body established by another law, must maintain the minimum capital the Commission prescribes, must have paid the statutory deposit to the Central Bank of Nigeria, and must meet the Commission’s other requirements, which now include a business plan showing the niche market it will serve.⁸

Several new features deserve attention.

Foreign shell insurers are barred. An insurer incorporated abroad that has no physical presence where it is licensed, and is not part of a financial group under effective consolidated supervision, may not operate in Nigeria, and no Nigerian insurer may deal with it.⁹

Offshore business counts. A Nigerian resident or company carrying on insurance business anywhere else in the world is treated as carrying on insurance business in Nigeria.¹⁰

Specialisation. From commencement, the Commission licenses insurers only as life or non-life companies. A life insurer may own shares in a non-life company and the reverse, a reinsurer may hold a combined licence, and existing composite insurers have five years to separate.¹¹

Offences. Transacting insurance business without a licence is an offence, and the unauthorised use of the words “insurer” or “underwriter” is a separate one, as we saw in Nature and Legal Meaning of Insurance in Nigeria.¹²

Two procedural features answer an old question. Under the 1961 and 2003 regimes, the Registrar or the Commission had a discretion that applicants resented, and in Excelsior Insurance Co Ltd v Registrar of Insurance, the court held that an applicant who met every statutory requirement had a right to be registered, and that refusal on an irrelevant ground could be compelled by mandamus.¹³ Section 5(5) of NIIRA now writes this rule into statute: when the Commission is satisfied that all requirements are met, it shall license the company within the timeline in its Service Charter. The Commission may still refuse where the application is false in a material respect, does not meet the requirements, or the applicant’s licence was earlier revoked, and an aggrieved applicant may appeal to the Commission’s Board within 30 working days.¹⁴

3. The capital floors

Capital is the centrepiece of the 2025 reform. Under section 15, an insurer must maintain minimum capital equal to the higher of a fixed figure and the risk-based capital the Commission determines. The fixed figures are ₦15 billion for non-life business, ₦10 billion for life assurance and ₦35 billion for reinsurance.¹⁵ NAICOM’s implementing circular added a ₦25 billion floor for existing composite insurers, which are being phased out under section 6. Risk-based capital means the Commission weighs insurance, market, credit and operational risk when fixing what a particular insurer needs, and it may require any insurer to hold more than the statutory minimum.¹⁶

For a new insurer, capital may consist of government bonds, treasury bills, cash and cash equivalents. For an existing insurer, it is the excess of admissible assets over liabilities, less its own shares, together with approved subordinated liabilities and other instruments the Commission allows.¹⁷ Existing insurers had 12 months from commencement to comply, and the Act is blunt about the consequence: the Commission shall cancel the registration of any insurer that does not meet the requirement for its category, and shall publish the list of compliant insurers within 30 days after the period expires.¹⁸

The statutory deposit works alongside capital. A new insurer deposits 50 per cent of the minimum capital with the Central Bank, which returns 80 per cent of it, with interest, within 60 days of registration. An existing company deposits 10 per cent of the minimum capital. The deposit may not be garnished, is invested in treasury bills or other secured instruments, and may only be applied as the Act allows. Failure to deposit is a ground for cancelling the licence.¹⁹ That deposit has a second purpose that policyholders should know about: if an insurer fails to pay a claim within the time the law allows, the insured can ask the Commission to pay it from the statutory deposit.²⁰

Here is a point that student notes rarely develop. Section 15(7) says the Commission “shall” cancel the registration of an insurer that misses the capital floor, which reads as a duty without discretion. Section 8, on the other hand, lets the Commission cancel only where it is “satisfied” that a listed ground exists, after notice and an opportunity to remedy.²¹ The two sections point in different directions. A court asked to decide whether an insurer that raised capital a week late must automatically lose its licence will have to choose between them. The Commission itself has said publicly that the 31 July 2026 deadline is statutory and cannot be extended without an amendment, which suggests the Commission reads section 15 as mandatory.

4. Supervision, cancellation and fair hearing

Cancellation grounds in section 8 go beyond capital. They include failing to conduct business on sound insurance principles, failing the solvency requirement, ceasing business for a year, having an unsatisfied judgment debt for 90 days, refusing examination of books, failing to file returns, failing to maintain adequate reinsurance, losing qualified staff, failing to set up special reserves, acting without required approval, and, notably, having at least five verified complaints of failure to pay claims promptly.²² That last ground links regulation to claims handling, a point we return to in Claims Settlement and Policyholder Protection Under NIIRA 2025.

The process matters as much as the grounds. The Commission must give a notice of the defect and a time to remedy it, and an insurer in breach may not carry on the affected licensable activity meanwhile. If the defect is not remedied, the Commission proceeds to cancel. On cancellation, the insurer must stop new business and the Commission may act as receiver or appoint one. The insurer has 30 days to appeal to the Board, which must decide within 90 days. Any court challenge must be brought in the Federal High Court, within 60 days of cancellation.²³

This sits against the constitutional right to a fair hearing in section 36 of the 1999 Constitution. An administrative body that penalises a party without hearing it acts invalidly, so the notice and appeal steps are the minimum an insurer can insist on.²⁴ The 60-day limit for suing is short, and a court may be asked whether it is compatible with the guarantee of access to court. Section 44, which protects property, is a more distant argument. Cancelling a licence is not a compulsory acquisition of the insurer’s property, but the Act’s later power to enforce the personal liability of shareholders and directors of a failed insurer touches that guarantee at the edges, as we see below.

5. Day-to-day duties of a licensed insurer

Part V of NIIRA is the working rulebook. An insurer must deliver policy documents on time, as seen in Formation of an Insurance Contract in Nigeria, obtain the Commission’s prior approval for any new product, keep prescribed records, and maintain reserves for unexpired risks and outstanding claims and for life business. It must also meet a capital adequacy test built on a risk-based approach, invest policyholders’ funds only as allowed, file returns and audited accounts, and observe limits on paying dividends.²⁵ Principal officers must be approved, and loans to non-executive directors are restricted, with a penalty of twice the loan.²⁶ Insurers must also maintain internal controls, report fraudulent conduct, and meet standards on advertising and misleading statements.²⁷

Two points link back to earlier articles. An insurer that does not keep adequate reinsurance arrangements risks cancellation under section 8, so reinsurance is a licence condition and not a commercial luxury, as the next section shows. And the commission and premium rules in sections 60 to 63 control what insurers and intermediaries may charge and pay, as covered in Premiums and the Risk Factor in Nigerian Insurance Law.

6. Intermediaries

Insurance rarely sells itself. NIIRA licenses three kinds of intermediary, and an insurer that deals with an unlicensed one is itself exposed.

Agents. No one may act as an insurance agent without a licence. An applicant needs a certificate of proficiency from the Chartered Insurance Institute of Nigeria, ten years’ experience in an underwriting firm, no conviction for fraud or dishonesty and no recent bankruptcy.²⁸ Agents must remit premiums as the Act requires.

Brokers. A broker must be licensed, renews the licence every five years, and must run through a registered firm or company led by a qualified person. A broking firm must hold professional indemnity cover of at least ₦100 million or half its previous year’s brokerage income, whichever is greater, may not hold more than 10 per cent in an insurer or loss adjuster, and must keep a clients’ account into which all premiums, claims and recoveries are paid, on pain of a penalty of at least ₦1 million.²⁹ Premium paid to a broker is deemed paid to the insurer, and the broker must pass it on within the statutory period, as explained in the article on premiums.

Loss adjusters. A loss adjuster must also be licensed, and the chief executive must belong to a recognised professional body. Foreign adjusters may attend claims only under the Act’s conditions.³⁰

For the student, the point is the line between insurer’s agent and insured’s agent. A person who helps a proposer fill in a form acts for the proposer, as we saw in Non-Disclosure and Misrepresentation in Nigerian Insurance Contracts. Licensing does not change whose agent a person is. It only determines whether he is allowed to act at all.

7. Reinsurance

Reinsurance is the insurance of insurers. One party, the reinsurer, in return for a premium agrees to indemnify the other, the reinsured or ceding company, against liabilities it incurs under its own contracts of insurance. English courts defined it in Delver v Barnes as a new assurance on the same risk, effected so that the first underwriters are indemnified, with both policies running together, and Nigerian courts have adopted that definition.³¹

Four features separate it from direct insurance. The parties are both insurers. The subject matter is the cedent’s liability under the original policy, not a house or a life. Every reinsurance contract is a contract of indemnity, even a life reinsurance, because it covers only what the reinsurer has paid out under the original policy. And reinsurance usually operates across borders. The original policyholder has no contract with the reinsurer, so the reinsurer owes the insured nothing directly, though its capacity is what lets the insurer pay large claims.

Reinsurance comes in two forms. In facultative reinsurance, each risk is offered and accepted individually, with terms agreed for that risk alone and no obligation on either side to cede or accept. In treaty reinsurance, the cedent agrees to cede a defined class or book of business, and the reinsurer agrees to accept it on pre-agreed terms, which may be proportional or non-proportional. To recover under a facultative contract, the reinsured must show it was legally liable to its insured and that the loss falls within the reinsurance.

Nigerian regulation of reinsurance has changed several times. The old rule compelling insurers to cede a fixed share of every policy to the state reinsurance corporation was repealed in 2003, and NIIRA has since repealed the Nigeria Reinsurance Corporation Act itself.³² In its place the Act licenses reinsurers directly with the highest capital floor, bars shell reinsurers from abroad, requires records and a general reserve fund for reinsurers, regulates reinsurance broking, and requires domestic classes of business (fire, motor, liability, life, accident, health, engineering, energy and others) to be placed with a company licensed under the Act unless an exemption applies.³³ In short, the law now keeps reinsurance capacity onshore where it can, and polices offshore placement more closely than before.

8. Mergers, transfers and winding-up

Insurers may not, without the Commission’s prior approval, amalgamate with, transfer business to or acquire business from another insurer, reconstruct their business, or appoint a management agent. The documents must be available for inspection by members and policyholders before an application.³⁴ Because policyholders are creditors in all but name, they have a stake in who ends up responsible for their policy.

When a licence is cancelled, Part XIII applies. The Commission may appoint a receiver or provisional liquidator to take charge of the assets, collect money owed to the insurer and administer the assets for the benefit of policyholders, clients and creditors. The receiver may freeze the insurer’s accounts and take over management, and the Commission or the receiver may apply to court to wind up the business under the Companies and Allied Matters Act.³⁵

The order of priority in a liquidation is the heart of policyholder protection. Fees and expenses of liquidation come first, then policyholders, then secured creditors, then other creditors, then staff, and last of all shareholders and directors.³⁶ Putting policyholders ahead of secured creditors is striking, because it reverses the ordinary expectation that secured creditors are paid first. The Commission or liquidator may also enforce the individual liability of the shareholders and directors of a failed insurer, limitation statutes do not bar the recovery of debts owed to a failing or failed insurer, and no suit may proceed against an insurer in liquidation without leave of court.³⁷ A secured lender whose priority is displaced, or a shareholder facing personal liability, might invoke section 44 of the Constitution, but the argument is hard: the Act changes the ranking of claims by statute, and does not seize the property of any person for the state. The requirement of leave to sue, on the other hand, raises a more direct question under the right of access to court in section 36.

A petition to wind up an insurer may also come from at least 50 policyholders, each holding a policy that has run for three years or more, with the Commission’s approval, or from the Commission itself where the licence has been cancelled or the insurer cannot be revived. A life insurer may not wind up voluntarily except to effect an approved amalgamation, transfer or acquisition.³⁸

9. What insurers can insist on

Regulation is not one-way. Insurers hold rights as well as duties. They hold the constitutional rights to a fair hearing and to compensation if their assets are expropriated.³⁹ They have a statutory right to a licence once the conditions are met, as Excelsior shows. At common law they may insist on the premium agreed, as Ezeigbo v Lion of Africa Insurance Co held.⁴⁰ They may enforce an arbitration clause that makes an award a condition of any court action, a Scott v Avery clause, and the court will stay proceedings until arbitration is done, as in Oghene & Sons Ltd v Royal Exchange Assurance.⁴¹ And they may resist claims by strangers to the contract, as in Abousaleh v White Cross Insurance Co.⁴² That last right has been narrowed by section 205 of NIIRA, under which a third-party beneficiary of a non-life policy may now claim directly, though the insurer keeps its defences against the insured.⁴³

10. Common student mistakes

• Citing the Insurance Act 2003 for licensing and capital. NIIRA sections 5 to 16 now apply.
• Quoting old capital figures. The current floors are ₦15 billion (non-life), ₦10 billion (life) and ₦35 billion (reinsurance), or risk-based capital if higher.
• Forgetting that composite licences are being phased out, and that insurers must be life or non-life.
• Ignoring the Commission’s duty to license once requirements are met (Excelsior, section 5(5)).
• Describing the statutory deposit as the same thing as capital. It is a separate deposit held by the Central Bank.
• Placing policyholders after secured creditors in a liquidation. Under section 110(5) they rank second, after liquidation costs.
• Treating NAICOM as created by NIIRA. It is created by the NAICOM Act, which remains in force.
• Missing that reinsurance is a licence condition, and that policyholders have no direct claim on reinsurers.

11. Problem question approach

Identify the actor: insurer, reinsurer, broker, agent or loss adjuster. Check its licence under the relevant section and whether it meets the capital and deposit requirements. If the Commission has acted against it, ask which section 8 ground applies, whether notice and a chance to remedy were given, and whether the appeal and limitation periods were respected. If the insurer has failed, apply Part XIII: who is the receiver, where do policyholders rank, and can personal liability be enforced. For intermediaries, check licence conditions and who the person was acting for. For reinsurance, separate the two contracts and remember there is no direct claim against the reinsurer.

12. Quick reference

Question	Answer	Authority
Who may carry on insurance business?	A licensed limited liability company or statutory body	NIIRA s 5(1), (3)
Minimum capital, non-life?	The higher of ₦15 billion and risk-based capital	NIIRA s 15(1)(a)
Minimum capital, life?	The higher of ₦10 billion and risk-based capital	NIIRA s 15(1)(b)
Minimum capital, reinsurance?	The higher of ₦35 billion and risk-based capital	NIIRA s 15(1)(c)
Deadline for existing insurers?	12 months from commencement	NIIRA s 15(6)
Consequence of missing it?	Commission shall cancel registration	NIIRA s 15(7)
New insurer’s statutory deposit?	50% of minimum capital; 80% returned after registration	NIIRA s 16(1), (2)
Appeal against licence cancellation?	To the Board within 30 days; then Federal High Court within 60 days	NIIRA s 8(6), (9), (11)
Right to be licensed?	Applicant meeting all requirements must be licensed	NIIRA s 5(5); Excelsior
Broker’s indemnity cover?	Higher of ₦100 million and 50% of annual brokerage	NIIRA s 43
Liquidation priority?	Fees, policyholders, secured creditors, other creditors, staff, shareholders	NIIRA s 110(5)
Voluntary winding-up by life insurer?	Barred, except for approved amalgamation	NIIRA s 112

13. Key cases

• Excelsior Insurance Co Ltd v Registrar of Insurance (1976) 2 FRCR 1: a qualified applicant must be registered, and refusal on irrelevant grounds can be compelled.
• Delver v Barnes (1807) 1 Taunt 48: the classic definition of reinsurance.
• University of Nigeria v Turner (1968) ALR Comm 290: adopted the English description of reinsurance in Nigerian law.
• Oghene & Sons Ltd v Royal Exchange Assurance (1968) 1 ALR (Comm) 119: arbitration clause enforced by stay of proceedings.
• Abousaleh v White Cross Insurance Co Ltd (1968) 2 ALR (Comm) 1: stranger to the policy could not claim (now qualified by NIIRA s 205).
• Ezeigbo v Lion of Africa Insurance Co Ltd (1968) 3 ALR (Comm) 88: the insurer’s right to the agreed premium.
• State v Daboh and Mordi (1975) 11 CCHCJ 37: the fraudulent registration of an insurer that prompted the statutory deposit rule.

Footnotes

1. Insurance Companies Act 1961, ss 5, 7, 8 and 44.
2. Insurance Decree 1976, ss 35 and 36.
3. National Insurance Commission Act, Cap N53, LFN 2004, s 1.
4. National Insurance Commission Act, Cap N53, LFN 2004, ss 6 and 7.
5. Constitution of the Federal Republic of Nigeria 1999, s 4 and Second Schedule, Part I, item 33.
6. Nigerian Insurance Industry Reform Act 2025, s 229.
7. Nigerian Insurance Industry Reform Act 2025, s 230.
8. Nigerian Insurance Industry Reform Act 2025, s 5(1) to (3).
9. Nigerian Insurance Industry Reform Act 2025, s 5(6) and (7).
10. Nigerian Insurance Industry Reform Act 2025, s 5(6) and (7).
11. Nigerian Insurance Industry Reform Act 2025, s 6(1) to (5).
12. Nigerian Insurance Industry Reform Act 2025, ss 4 and 10.
13. Excelsior Insurance Co Ltd v Registrar of Insurance (1976) 2 FRCR 1.
14. Nigerian Insurance Industry Reform Act 2025, ss 5(5) and 7(1) to (5).
15. Nigerian Insurance Industry Reform Act 2025, s 15(1) to (8).
16. Nigerian Insurance Industry Reform Act 2025, s 15(1) to (8).
17. Nigerian Insurance Industry Reform Act 2025, s 15(1) to (8).
18. Nigerian Insurance Industry Reform Act 2025, s 15(1) to (8).
19. Nigerian Insurance Industry Reform Act 2025, s 16(1) to (7).
20. Nigerian Insurance Industry Reform Act 2025, s 210(2).
21. Nigerian Insurance Industry Reform Act 2025, s 8(1) and (2).
22. Nigerian Insurance Industry Reform Act 2025, s 8(1) and (2).
23. Nigerian Insurance Industry Reform Act 2025, s 8(3) to (11).
24. Constitution of the Federal Republic of Nigeria 1999, ss 36(1) and 44(1).
25. Nigerian Insurance Industry Reform Act 2025, ss 17 to 35.
26. Nigerian Insurance Industry Reform Act 2025, ss 12, 13 and 211.
27. Nigerian Insurance Industry Reform Act 2025, ss 206 to 209.
28. Nigerian Insurance Industry Reform Act 2025, ss 37 and 38.
29. Nigerian Insurance Industry Reform Act 2025, ss 39, 43 and 47.
30. Nigerian Insurance Industry Reform Act 2025, ss 48 to 52.
31. Delver v Barnes (1807) 1 Taunt 48, 51; University of Nigeria v Turner (1968) ALR Comm 290.
32. Nigerian Insurance Industry Reform Act 2025, s 229.
33. Nigerian Insurance Industry Reform Act 2025, ss 5(6), 15(1)(c), 20, 23, 40 and 204.
34. Nigerian Insurance Industry Reform Act 2025, s 107(1) to (3).
35. Nigerian Insurance Industry Reform Act 2025, s 110(1) to (10).
36. Nigerian Insurance Industry Reform Act 2025, s 110(1) to (10).
37. Nigerian Insurance Industry Reform Act 2025, s 110(1) to (10).
38. Nigerian Insurance Industry Reform Act 2025, ss 111 and 112.
39. Constitution of the Federal Republic of Nigeria 1999, ss 36(1) and 44(1).
40. Ezeigbo v Lion of Africa Insurance Co Ltd (1968) 3 ALR (Comm) 88.
41. Scott v Avery (1856) 5 HL Cas 811; Oghene & Sons Ltd v Royal Exchange Assurance Corporation (1968) 1 ALR (Comm) 119.
42. Abousaleh v White Cross Insurance Co Ltd (1968) 2 ALR (Comm) 1.
43. Nigerian Insurance Industry Reform Act 2025, s 205.