To proceed with insurance industry recapitalisation as provided in the Nigerian Insurance Industry Reforms Act (NIIRA) 2025, the industry regulator must come out with an evaluation template to enable fair assessment of companies.
This is critical because the components or what constitute the capital as provided in the law is ambiguous and would lead to complexities for the companies, Barineka Thompson, chief executive officer, MettleHouse Consulting Limited said.
Barineka who retired from the National Insurance Commission as a Director, said, NIIRA is speaking about minimum capital requirement, but also risk based capital meaning that issues around shareholders fund, solvency margin, admissible assets and related matters will be taken into consideration.
According to him, an evaluation template will help assess the capital for the purpose of confirming that companies have met the required standards, again this will take into consideration the fact that the final framework on risks based capital is yet been released.
“If you consider all these factors, shareholders’ funds, admissible assets, solvency margin, and risk-based capital, you will run into complexity because each of these perspectives yields different results. None of them will give you the same figure.”
“Therefore, at this inception stage, it is best to adopt a single, consistent approach for evaluating capital across all companies. That way, you are using the same template to assess everyone and you can say, “This is where you all stand.”
Insurance companies in Nigeria have been given twelve calendar months ending July 2026 to comply with the new minimum capital requirement prescribed by the Nigerian Insurance Industry Reform Act (NIIRA) 2025.
The directive confirmed in a circular dated August 13, 2025 sent to all Insurance and Reinsurance Companies in Nigeria by the National Insurance Commission (NAICOM) says the recapitalisation exercise has commenced from July 31, 2025 date of enactment of the Act.
NIIRA 2025 introduces higher Minimum Capital Requirements (MCR) of N10 billion, N15 billion, N25 billion and N35 billion for life, non-life, composite and reinsurance companies respectively, and a shift to a Risk-Based Capital (RBC) framework for insurance and reinsurance companies in Nigeria.
“This approach avoids discrimination, reduces complexity, and minimizes anxiety and frustration in the system. It also ensures fairness and proportionality, Barineka Thompson said.
Babatunde Fajemirokun, managing director/CEO, AIICO Insurance Plc commenting on what constitute the capital, said Clause 15(4) and (5) set out minimum capital requirements for insurers, with subsection 4 applying to new entrants and subsection 5 to existing firms, where capital is defined as the excess of admissible assets over liabilities, excluding own shares.
Fajemirokun noted that admissible assets, as defined in Section 24, exclude items such as goodwill, deferred tax assets, unsecured loans, and certain receivables, meaning the relevant measure is adjusted shareholders’ funds, not accounting shareholders’ funds.
“This interpretation is based on the legislation, but final clarification will have to come from guidelines by the Commission”, Fajemirokun noted.
Obinna Chilekezi, Insurance consultant and lecture at one of the top private universities in Nigeria discussing on components of the capital said, NAICOM has the sole power to determine what constitute capital requirement for this recapitalisation.
Some people are saying the law has issues with respect to component of capital, I say, nothing is flawed in the law. When you refer to minimum capital requirement or risk-based capital as provided in the law, only NAICOM has the authority to make that decision, he said.
Thompson continuing, said, providing a template will make the regulatory process seamless, even as we advance to more complex levels of capital evaluation. Those more advanced evaluations can be used for regulatory management and the overall stability of individual companies and the industry. That is my recommendation, he stated.
On whether shareholder’s funds can be used as the benchmark for the capital, he said, ‘no’, because shareholders’ funds are composed of several variables. “You cannot just include foreign exchange gains (FX gains) that have passed through the profit and loss (P&L) account and inflated the value of shareholders’ funds and count that as capital.”
“What happens tomorrow if the exchange rate jumps to N1, 800.00 or drops to N1, 400? 00. There is a direct cyclical effect, which means it is not stable, at least not in the short term (e.g., over three months). Exchange rates change constantly.”
Thompson said, unless it is a realized gain, where the currency has been converted into naira, it doesn’t become solid capital. In addition, revaluation results are sometimes factored into shareholders’ funds. But not all revaluation results should be accepted.
“There is always the tendency for overstatement, especially with assets like property. For instance, someone may claim their property is worth N1.5 billion when it gets to the market, they will not price it above N700 million. You need to bring actual value to the table, not theoretical or inflated figures. Yet, these inflated figures are often used in practice, and that is where confusion arises.”
Thompson stated further that unless there is a streamlined, well-defined requirement for what qualifies as capital, there will always be inconsistencies. Regulators must follow a clear line of thought, depending on their capacity and the technical expertise of those involved, not just accounting expertise, but regulatory expertise as well.
“These areas can benefit from advisory input, and we are available if the Naira and Kobo are put on the table. We are ready to advice, he said.
“The good thing is, this kind of work can be completed in as little as a week. But time is of the essence. The regulators need to act fast so that companies can plan, set timelines, and develop strategies.
Right now, everyone is just using “crayon and chalk” to draw different pictures. But chalk doesn’t produce vibrant colour anymore, things have moved on.”
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 accelerate 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.
“In line with the provisions of the Act, the new MCR takes effect from the date of Presidential assent, and all operators are required to comply fully within a twelve (12) month period from the effective date.”
Usman Jankara, deputy commissioner for Insurance (Technical), NAICOM in recent circular said, in line with the provisions of the Act, the new MCR takes effect from the date of Presidential assent, that is 31st July, 2025.”
“A 12-month period has been provided for insurers and reinsurers to comply with the new MCR as well as the applicable RBC as may be determined. All insurers and reinsurers shall comply with the requirements on or before the 30th day of July 2026.”
The circular says, the Commission shall, in due course, issue comprehensive guidelines and circulars detailing the modalities for the recapitalisation exercise.
