The Federal Government raised minimum capital requirements for insurance firms by 500 per cent, giving operators one year to meet the new thresholds or risk losing their licenses.

The National Insurance Commission announced the directive as part of wide-ranging reforms in the newly enacted Insurance Industry Reform Act, signed by President Bola Ahmed Tinubu earlier this month.

Under the revised thresholds, non-life insurers must increase their capital from ₦3 billion to ₦15 billion, life insurers from ₦2 billion to ₦10 billion, and reinsurers from ₦10 billion to ₦35 billion. The reforms aim to strengthen the sector’s risk-bearing capacity, enhance claims settlement, and bolster investor confidence.

“A capitalized insurance sector means insurers can take on bigger risks, give businesses the confidence to expand, and create the stability the economy needs,” Ikeoluwa Alabi, an analyst at Afrinvest West Africa told Bloomberg.

“Recapitalization, combined with compulsory insurance enforcement, means stronger balance sheets, better claims-paying ability, and more trust from the public.”

The announcement sparked a rally in the capital markets, with an index tracking insurance stocks on the Nigerian Exchange (NGX) closing nearly 8% higher, reflecting strong investor optimism.

This stood in contrast to the broader All-Share Index, which slipped 0.1%, highlighting the sector’s bullish sentiment despite overall market softness.

The recapitalization mandate forms part of President Bola Ahmed Tinubu’s wider economic reform drive, aimed at expanding Nigeria’s economy from $243 billion to $1 trillion by 2030.

Key reforms under this agenda include a tenfold hike in bank capital requirements, easing of currency controls, removal of fuel subsidies, and comprehensive tax restructuring.

To promote transparency and accountability, the National Insurance Commission (NAICOM) has set up an 11-member committee to oversee the recapitalization rollout. The panel will track the sourcing and verification of funds, ensuring insurers meet the new capital thresholds through legitimate and sustainable channels.

The policy is expected to spur a wave of mergers and acquisitions as smaller operators consolidate to meet the requirements.

Industry stakeholders have welcomed the reform, citing its potential to expand insurance penetration and bring Nigeria’s market in line with global best practices.