…Insurance Index rises by 54.28% in August
Insurance stocks are rallying remarkably on the Nigerian Exchange Limited (NGX) and the probability is even high that they will continue to outpace others in the market in this second half (H2) of the year.
The optimism around insurance stocks results from a perceived positive impact of Nigerian Insurance Industry Reform Act (NIIRA) 2025, passed last week.
The Nigerian Insurance Industry Reform Act (NIIRA) 2025, which was recently approved by President Bola Ahmed Tinubu, repeals and consolidates several outdated insurance laws into a single, modern legal framework.
The new Act — a landmark legislation that strengthens Nigeria’s financial sector and accelerates the nation’s march toward a $1 trillion economy – also provides for comprehensive regulation and supervision of all insurance and reinsurance businesses operating within Nigeria.
Read also: Insurance, industrial stocks push NGX-ASI higher by 0.12%
At +91.41% NGX Insurance Index outperforms others
As at Monday, August 11, the NGX Insurance Index designed to provide an investable benchmark to capture the performance of the insurance sector, had risen year-to-date by 91.41 percent, outpacing the NGX All Share Index (ASI) which had risen this year by 40.80 percent.
Only this month, following the coming of Nigerian Insurance Industry Reform Act 2025, the NGX Insurance Index has risen by 54.28 percent.
“The recent signing of the Nigerian Insurance Industry Reform Act 2025 by the President has sparked renewed investor interest in insurance stocks, driven by expectations of sector-wide recapitalisation and regulatory-induced growth opportunities,” CardinalStone Research said in their August 11 Model Equity Portfolio (MEP).
“This momentum translated into notable price gains across several insurance tickers. In line with the strong momentum observed, we plan to rotate into AIICO, funding the move by trimming our MTNN holdings to capture potential upside,” they said.
The NGX Insurance Index comprises the most capitalised and liquid companies in insurance. Except Sunu Assurance with negative returns, other stocks in the insurance sector have recorded impressive returns this year.
All insurance stocks are on autopilot
BusinessDay’s checks on the 15 most capitalised and liquid companies in insurance show that AIICO Insurance has risen this year by 169.23 percent; Cornerstone Insurance (+95.83 percent); Sunu Assurances (-48.84 percent); Guinea Insurance (+71.60percent); Lasaco (+33.98percent), and Linkage Assurance (+91.53percent).
Others are: Universal Insurance (+83.33 percent); Veritas Kapital (+67.39 percent); Coronation Insurance (+95.83percent); Axa Mansard (+96.34 percent); NEM Insurance (+228.77 percent); Prestige Assurance (+65.29 percent); Consolidated Hallmark (+35.07 percent); Regency Assurance (+85.33percent), and Sovereign Trust Insurance (+166.9 percent).
In addition to the most capitalised insurance stocks, others that have risen remarkably this year are: Custodian Investment (+145.03 percent), Mutual Benefits (+426.23 percent), and Royal Exchange (+162 percent).
Read also: Investors swoop on insurance stocks as reform act berths
Overall sentiment stays positive
“Our choice of AIICO, in addition to its strong momentum, is supported by its healthy asset and net asset base. The company boasts the largest assets and the second-largest equity base among members of the Insurance Index. In H1’25, AIICO achieved a 34 percent year-on-year (YoY) growth in insurance service revenue and a 49.7 percent increase in investment income, which together contributed to significant growth in its bottom line,” CardinalStone Research said.
“Momentum remains with insurance, while industrials face supply after today’s drawdown; expect continued rotation into high-beta names with tactically two-way flows in banks as investors position ahead of prints. Overall sentiment stays positive, but tapes are stretched, look for intraday whips and buy-the-dip interest in recently hit sectors,” according to Lagos-based Vetiva research analysts in their August 11 note.
United Capital research analysts said, “We expect investor positioning to remain tilted toward fundamentally strong financial services stocks, particularly banks and insurers, given their resilient earnings profiles and attractive valuations.”
Assenting the NIIRA 2025 reaffirms Key provision of the NIIRA 2025the government’s commitment to financial stability, economic development, and inclusive growth.
The Act introduces critical measures such as: stringent capital requirements to ensure the financial soundness of operators; enforcement of compulsory insurance policies to enhance consumer protection; digitisation of the insurance market to improve access and efficiency; zero tolerance for delays in claims settlement; and creation of dedicated policyholder protection funds, especially in cases of insolvency; and expanded participation in regional insurance schemes, including the ECOWAS Brown Card System.
The reform introduced by the new law is expected to catalyse new investments, boost consumer confidence and position Nigeria as a leading insurance hub in Africa.
NIIRA 2025 seen ushering in mergers, acquisitions
“In our view, these reforms are expected to reshape the competitive landscape of the industry, with the recapitalisation directive likely to pose challenges for the relatively smaller operators, given the existing market fragmentation amidst other structural bottlenecks,” CardinalStone Research said.
Read also: Nigeria insurance stocks gain most in almost 20 years on new law
“Hence, we could see a wave of industry consolidation through mergers and acquisitions, as less-capitalised firms seek to meet the new thresholds within the stipulated timeframe. Insurers would be required to comply with the new capital requirements within 12 months of the law’s commencement, as stipulated by the National Assembly. However, we expect further regulatory guidance on implementation timelines, qualifying capital, and transitional provisions,” the analysts noted in their August 6 sector update.
