Nigeria’s insurance sector is expected to see an estimated N600 billion capital injection by the time the proposed insurance industry recapitalisation exercise kicks off.
This follows the anticipated passage of the Nigeria Insurance Reform Bill into law before the end of 2025, a bill that will overhaul the sector’s regulatory framework and fast-track transition to a risk-based capital regime.
According to Agusto & Co’s 2025 Nigerian Insurance Industry Report, insurance revenue in Nigeria surpassed the N1 trillion mark in the financial year ending December 31, 2024, reaching N1.1 trillion. This growth, it said, was driven by aggressive marketing efforts, higher premiums reflecting inflationary pressures, and a 40.9 per cent depreciation of the naira, which inflated premiums from foreign currency-denominated policies.
With the Nigeria Insurance Reform Bill, which seeks to overhaul the Industry’s regulatory framework, expected to be passed into law before 31 December 2025, the report noted that the transition to a risk-based capital regime would significantly impact the Industry’s capitalisation.
“We anticipate circa N600 billion capital injection by insurers to comply with the uptick in the minimum capital requirement and increase the underwriting capacity. While Insurers would be allowed to recapitalise over a period, we anticipate an uptick in activities to shore up the capital base in FY 2025.
“In our view, the recapitalisation exercise would shape risk underwriting activities in the near term as insurers seek to generate adequate returns for shareholders. Thus, we expect the adoption of innovation on the back of technology to drive insurance penetration and improved risk retention on the back of the enlarged capital base,” it pointed out.
The report stated that, at the end of 2025, the insurance revenue will maintain the upward trajectory spurred by the uptick in compulsory insurance policies’ enforcement, increasing technology adoption in product distribution and recapitalisation activities.
It noted that, increased spending on infrastructure development by the various tiers of government would also increase the revenue from underwriting the underlying risks, adding that, the entrance of new players such as NPF Insurance Company Limited, CHI Life Assurance Limited and Capital Express Indemnity Insurance Limited would support the Industry’s insurance revenue.
“Notwithstanding, we do not anticipate a significant rise in the loss rate, as the increased insurance revenue would subsume the higher claims. The directive for expensing losses on onerous contracts from the transaction’s outset, as specified in the IFRS 17 accounting standard, would also moderate the loss ratio as insurers focus on profitable policies rather than the hitherto emphases on growing the insurance revenue.
“In FY 2025, we anticipate a decline in the Industry’s profitability, largely due to the lower foreign currency revaluation gains. Thus, a reduction in the post-tax return on average equity (ROE) to 22.8 per cent is expected. We believe that sustainable profit (excluding the volatile foreign currency revaluation gains) will maintain the upward trajectory, supported by stricter enforcement of compulsory insurance policies, a more efficient product distribution and an enlarged capital base to support the insurance income,” it stressed.
