Recapitalization: Experts caution over court cases as insurers raise N720 billion

 

Experts have described the recently concluded insurance recapitalisation exercise as a critical step necessary to build a stronger industry with a capacity to underwrite bigger risks, while cautioning that operators dragging their regulator to court may not augur well for the industry.

The comments follow moves by NICON Insurance Limited and Nigeria Reinsurance Corporation (Nigeria Re) to challenge the National Insurance Commission (NAICOM) in court over the recapitalisation process.

At the end of the exercise, Nairametrics gathered that the 43 insurance firms that met the July 31, 2026, deadline have raised at least N720 billion.

What they are saying

While analysts believe the exercise will strengthen the industry, they warn that taking legal action against a primary regulator rarely ends well for corporate entities.

Dr. Jerry Igwilo, Chief Executive Officer of Nisela Capital Limited, told Nairametrics that while companies have the right to seek legal interpretation, confronting the regulator in court is not good for business.

• “The regulator is the one who makes the rules of the game. And if any of the parties feel otherwise, I mean, the courts are there. That’s why we have the court; it’s a function of interpretation,” Igwilo stated.
• “However, they should remember, if you take your regulator to court, most times, you don’t come out stronger because the regulator is the regulator. They decide the rule of the game. Of course, backed by the law.”

Igwilo noted that the recapitalisation presents an opportunity for weaker firms to consolidate.

• “There are a lot of insurance companies out there that are not performing very well, that have an issue with struggling to raise this capital. So, it’s an opportunity for them to consolidate with other entities and have a much stronger insurance sector,” he said.

Also commenting, economist and CEO of the Centre for the Promotion of Private Enterprise, Dr. Muda Yusuf, said that despite the legal row, the exercise will improve the industry’s capacity and reputation. He pointed out that limited capital has restricted Nigerian insurers from key sectors.

• “One of the shortcomings of our insurance sector is a very limited capacity to underwrite big risk, which is why they don’t have very strong footprints in places like oil and gas, and maybe even in telecoms.”

According to him, higher capitalisation will boost confidence in the sector.

• “The bigger capitalization enhances the reputation of the sector, their confidence that this sector has capacity to absorb any shock because of their strong capitalization. So it will help their image, it will help their perception and all of that.”

Yusuf also said the exercise will force out weak players.

• “It will also get rid of those fringe players because there are so many of them that are not so strong. I think these ones, they either merge or they drop out.”

Get up to speed

The dispute escalated after NICON and Nigeria Re petitioned the Federal Government over aspects of NAICOM’s implementation of the recapitalisation exercise under the Nigerian Insurance Industry Reform Act (NIIRA) 2025.

• Among the issues raised was NAICOM’s requirement for a 1% capital injection fee, alongside processing and verification charges contained in the Commission’s Minimum Capital Requirement Guidelines.
• They argued that the directive was inconsistent with Section 16(3) of NIIRA 2025, which provides for a 10% statutory deposit with the CBN.
• NICON and Nigeria Re maintained that they had complied with the July 31, 2026 recapitalisation deadline by injecting N20 billion into NICON Insurance and N30 billion into Nigeria Re through Mudaraba Term Deposit accounts with Lotus Bank Limited.

However, NAICOM has challenged the companies’ interpretation of the requirements, arguing that the capital injections alone did not constitute full compliance with the recapitalisation framework.

At least N720 billion raised by insurers

The 43 companies cleared by NAICOM raised an estimated N720 billion through the recapitalisation exercise, significantly strengthening the sector’s capacity to absorb risks, support economic growth, and improve policyholder protection.

Under the new framework, non-life insurers are required to maintain a minimum capital base of N15 billion, life insurers N10 billion, composite insurers N25 billion, while reinsurers must hold at least N35 billion.

• Based on NAICOM’s compliance figures, the 23 non-life insurance companies collectively raised approximately N345 billion, while the 10 life insurance firms raised N100 billion.
• The eight compliant composite insurers accounted for N200 billion, while the two compliant reinsurers raised N75 billion.

Together, the capital raised by the compliant operators amounts to N720 billion

Industry estimates suggest the figure could exceed N800 billion once the eight firms currently under verification are cleared by the regulator.

Some firms await regulatory clearance

Several insurance companies excluded from NAICOM’s initial list of compliant operators have since assured shareholders that they have met the capital requirements and are awaiting final regulatory approval.

• African Alliance Insurance Plc said it remained under a regulatory intervention until June 16, 2026, when control of the company was returned to shareholders. The insurer disclosed that it has submitted a recapitalisation plan to NAICOM and is awaiting further directives.
• Staco Insurance Plc also stated that it remains actively engaged with the regulator and has continued implementing measures aimed at achieving full compliance.
• Similarly, Sovereign Trust Insurance Plc said it had met the required capital threshold as of July 31 and is awaiting regulatory verification.
• Guinea Insurance Plc recently announced the successful completion of a N12.6 billion hybrid capital raise, comprising a rights issue and private placement, which it said places the company above the minimum capital requirement for non-life insurers, subject to NAICOM’s final verification.

Regency Alliance Insurance Plc also disclosed that it raised N6.04 billion through a combination of rights issue and private placement, positioning the company above the N15 billion minimum capital threshold for general insurance operators.

What you should know

The insurance recapitalisation exercise was introduced to strengthen operators’ financial capacity, improve claims-paying ability, and enhance the industry’s resilience against economic shocks.

The exercise follows the banking sector recapitalisation programme, which saw 33 Nigerian banks raise N4.66 trillion over a 24-month period.

Meanwhile, Nigeria’s pension industry is currently undergoing a similar recapitalisation process, with the National Pension Commission (PenCom) setting a compliance deadline of December 31, 2026.