NAICOM Launches Policyholder Protection Fund, Threatens Licence Revocation For Non-Compliance

Nigeria’s insurance regulator has issued binding guidelines for a new industry-wide protection fund that will compel every licensed insurer and reinsurer in the country to make annual cash contributions or risk losing their operating licence — one of the most consequential consumer-protection interventions in the sector since the consolidation exercise of the mid-2000s.

The National Insurance Commission (NAICOM) published the framework for the Insurance Policyholders’ Protection Fund (IPPF) under the authority of the Nigerian Insurance Industry Reform Act (NIIRA) 2025, which reshaped the legal architecture of the sector earlier this year.

The guidelines take effect immediately.

NAICOM did not disclose an initial capitalisation target for the Fund or a timeline for when it would be considered adequately funded for resolution purposes.

The IPPF is designed to function as a resolution backstop: a ring-fenced capital pool available to settle outstanding policyholder claims when a licensed insurer or reinsurer becomes insolvent or enters regulatory distress.

The mechanism addresses a longstanding vulnerability in the Nigerian market, where policyholders holding valid claims against failed insurers have historically had no guaranteed recourse.

All insurance and reinsurance companies operating in Nigeria are required to remit 0.25% of their annual net premium income to the Fund, with payments due into designated deposit money bank accounts no later than 30 June each year.

NAICOM said it will supplement industry contributions by injecting 0.25% of the balance held in the existing Security and Insurance Development Fund (SIDF) into the IPPF annually, creating a dual-stream capitalisation model.

The regulator has left little room for delay or dispute: the guidelines state explicitly that failure to remit the full assessed contribution within the stipulated timeframe shall constitute grounds for suspension or cancellation of an operator’s licence. The same penalty framework applies to defaults on any loans extended from the Fund.

Fund Governance and Investment Rules
Day-to-day management of the IPPF will be delegated to an independent professional Fund Manager, subject to a minimum paid-up capital threshold of N5 billion.

Investment activity is restricted to low-risk, government-backed instruments — a deliberate constraint intended to preserve liquidity and protect the Fund from market volatility.

Oversight sits with a dedicated governance committee composed of industry and regulatory representatives. Members are bound by a Code of Conduct that bars them from using their positions for personal advantage or to direct decisions in favour of any insurer, reinsurer, or connected party.

The guidelines introduce a mandatory early-warning mechanism: insurance operators who become aware of imprudent practices within their organisations or elsewhere in the industry are required to report such conduct to NAICOM within five working days.

The Commission has provided explicit anti-retaliation protections, stating that no whistleblower shall be subjected to retaliation, intimidation, or any form of adverse action for making a disclosure.

The IPPF framework arrives as NAICOM pursues a broader reform agenda under NIIRA 2025, which analysts have described as the most substantive overhaul of Nigeria’s insurance legislation in two decades.

Persistent concerns about claims settlement failures and insurer insolvency — particularly in the life and health segments — have eroded public confidence in the sector and suppressed insurance penetration rates that remain among the lowest in sub-Saharan Africa.