Policyholders’ Protection Fund Will Cover Insurance Claims Shortfall – NAICOM

The National Insurance Commission (NAICOM) said the Policyholders’ Protection Fund (PPF) will be activated to cover any shortfall in claims payment following the withdrawal of licenses of six insurance companies that did not meet the industry recapitalisation exercise.

The commissioner for insurance and chief executive officer of NAICOM, Mr Olusegun Omosehin, disclosed this yesterday at an interactive session with insurance journalists held in Lagos.

The assurance comes as NAICOM intensifies efforts to strengthen confidence in Nigeria’s insurance industry and ensure that policyholders are not left without recourse when an insurer becomes insolvent.

At the end of the exercise, 48 insurers and two reinsurers were relicensed. Six licenses were withdrawn: Nicon Insurance, Nigeria Reinsurance Corporation, Goldlink Insurance, Staco Insurance, Royal Exchange Prudential Insurance, and Universal Insurance.

The Nigerian Agricultural Insurance Corporation (NAIC) also failed to meet requirements for general insurance. Their general business licenses were withdrawn, but they will continue to underwrite agricultural insurance under their original mandate.

Omosehin said, “policyholders should not assume that the withdrawal of the companies’ licences means they will automatically lose their claims, stressing that the protection mechanism was designed to provide a safety net for customers of failed insurers.”

Explaining the framework, Omosehin said the PPF was still in its infancy but had commenced operations with a clear mandate to protect policyholders from losses arising from the failure of insurance companies.

“As of today, the licences of six companies have been withdrawn. It is difficult to predict the outcome of the liquidation process because most of these entities have assets,” the commissioner said.

According to the regulator, the assets of the affected companies will first be realised and used to settle liabilities to policyholders before the PPF is considered.

The Commissioner explained that where the assets realised are sufficient to cover policyholders’ claims, the fund would not be required.

“For instance, if the total amount owed to policyholders is N2 billion and the assets realised are N3 billion, policyholders will be paid first. Other creditors will be settled from the balance. The PPF will not be involved,” the Commissioner explained.

He further said, however, where the proceeds from liquidation are insufficient to meet policyholders’ liabilities, the PPF will be deployed to cover the shortfall.

“If the assets realised are not sufficient to meet policyholders’ liabilities, we will then draw from the PPF to cover the shortfall,” the Commissioner said.

The Commissioner, however, said it was too early to determine whether the current capacity of the PPF would be adequate to meet potential claims arising from the liquidation of the six companies.

“Whether the current capacity of the fund will be sufficient will depend on the final outcome of the liquidation exercise,” he said.

The Commissioner assured that NAICOM’s priority remains policyholder protection, and that the regulatory framework under the Nigerian Insurance and Reinsurance Act, NIRA 2025, provides clear guidance on how such situations will be handled.

Industry stakeholders stated that the activation of the PPF is a key test of the new regime, as it is expected to boost public confidence in the insurance sector following the recapitalisation.

With 48 insurers and two reinsurers raising a total capital of N1.079 trillion for the recapitalisation exercise, stakeholders expected the focus to shift to claims settlement, risk-based supervision and market conduct.