By 
The Nigerian Senate has put forward a proposal for a N50 million fine or a two-year prison sentence, or both, for principal officers of insurance companies operating without valid licenses. This proposal is part of the broader Nigeria Insurance Industry Reform Bill, 2024, sponsored by Senator Tokunbo Abiru (APC, Lagos East) and 40 other senators. The bill seeks to repeal existing insurance-related laws, including the Insurance Act, Cap117 2004, the Marine Insurance Act, Cap M3 Laws of the Federation of Nigeria 2004, and the Nigeria Reinsurance Corporation Act, Cap N131, Laws of the Federation of Nigeria.
The bill, which passed its second reading in July, also stipulates that individuals found engaging in unlicensed insurance activities could face a fine of N25 million or a prison term of up to two years, or both.
The bill states, “A person who transacts any insurance business without being licensed for that purpose under this bill commits an offence and is liable on conviction, in the case of an individual, to a fine of N25,000,000 or to imprisonment for two years or both.
“(b) a company, firm or other combination of persons, each principal officer of the company, firm or other combination of persons responsible to a fine of N50,000,000 or imprisonment for a term of two years; or to both.”
Beyond these punitive measures, the bill outlines stringent capital requirements for entities wishing to operate in Nigeria’s insurance market. Non-life insurance businesses must maintain a minimum capital of N25 billion or a risk-based capital as determined by the commission. For life assurance businesses, the minimum capital requirement is set at N15 billion, while reinsurance businesses are required to maintain a capital of N45 billion. These measures are intended to ensure that insurers have the financial resilience necessary to meet their obligations.
The bill also mandates that any insurer intending to commence operations in Nigeria must deposit 50% of the required minimum capital with the Central Bank of Nigeria (CBN). Upon registration, 80% of this deposit will be returned with interest within 60 days. Existing companies are required to deposit 10% of the minimum capital with the CBN, with interest applied annually at the minimum lending rate.
To further protect consumers, the bill specifies that insurance policy documents must be delivered to the insured within five working days after the payment of premiums, or within 30 working days for special and industrial risk insurance. Failure to comply with this provision will result in a fine of up to 5% of the premium received, along with additional penalties as determined by the commission.
Moreover, insurers are prohibited from denying claims based on policy terms or conditions if it is proven that the policy document was not delivered before the loss occurred, except in specific circumstances. The bill also stipulates that the introduction of new insurance products will require prior approval from the commission, which must respond within 30 days of receiving an application. If the commission fails to communicate its decision within this timeframe, the product will be deemed approved.
Insurers who introduce new products without the necessary approval will face daily fines of N5 million for each day the violation continues.
The bill is a significant step towards ensuring the integrity and stability of Nigeria’s insurance industry, with the aim of fostering greater trust and confidence among consumers.
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