Revoked Insurance Licences Trigger Claims, Premium Concerns

The recent revocation of licences for six insurance companies by the National Insurance Commission (NAICOM) has raised significant concerns among thousands of insurance policyholders, with many expressing anxieties over the implications for their claims and the status of their premium contributions.

The revocation followed an industry-wide recapitalisation exercise mandated by NIIRA 2025, which successfully attracted about N720 billion in new capital contributions. While 43 insurers have met the necessary criteria, six, including Goldlink Insurance Plc, Staco Insurance Plc, NICON Insurance Limited, Nigeria Reinsurance Corporation, Royal Exchange Prudential Life Assurance Plc, and Universal Insurance Plc, have not.

As stipulated in Section 212 of the Nigerian Insurance Industry Reform Act (NIIRA) 2025, policyholders are meant to be settled from the Insurance Policyholders’ Protection Fund (IPPF), funded by the contribution of 0.25 per cent of insurers’ and reinsurers’ net premium income annually to reinforce the safety net for policyholders.

In the wake of the recapitalisation exercise, NAICOM had introduced the Guidelines for the Collection, Management, and Administration of the Insurance Policyholders’ Protection Fund (IPPF).

These guidelines direct all insurance and reinsurance companies to contribute 0.25 per cent of their net premium income annually to reinforce the safety net for policyholders, thereby protecting them from potential insolvency and delayed claims.

The IPPF is funded through two key sources: 0.25 per cent of the gross premium income from every insurer and reinsurance operator, and a similar percentage of the balance in the Security and Insurance Development Fund as of December 31st of the prior year.

This fund is designed to act as a financial safety net, ensuring that legitimate claims are honoured if an insurer becomes insolvent or has its license revoked by NAICOM.

NAICOM’s actions have varied among these six companies. Goldlink Insurance, which has been delisted from the Nigerian Exchange, has emerged as a clear exit case, while Universal Insurance Plc has had its licence revoked. For the remaining companies, potential outcomes may include additional capital injections, restructuring, acquisitions, transfers of business, or even receivership.

This regulatory shift has resulted to anxiety among policyholders across Nigeria who rely on vital insurance products such as motor, health, and life insurance.

Abimbola David, a school teacher with a N5 million endowment policy for her children’s education, expressed concern after learning that her insurer’s licence had been revoked.

Similarly, Seyi Oladipupo, a businessman, who initiated an educational insurance policy for his newborn, is left wondering how he might be compensated through the IPPF.

Additionally, employees whose group life policy was with one of the affected insurers are worried about their families’ financial security should anything happen to them.

Calls for NAICOM to clarify its plans for these policyholders are growing, especially as laws mandate employers to secure group life insurance for their workers.

Attempts to obtain NAICOM’s statement were unsuccessful, as the Commission said it would address the media today (Friday) on the outcomes of the Insurance Sector recapitalisation exercise.

In light of these changes, the president and chairperson of the Governing Board of the Nigerian Council of Registered Insurance Brokers (NCRIB), Ekeoma Ezeibe, highlighted the significance of NIIRA 2025 for policyholders.

She noted that the Act paves the way for essential reforms, thereby reinforcing the insurance sector’s resilience in adequately managing unforeseen losses.

According to her, moreover, the Act mandates that insurance brokers maintain a minimum of N100 million in Professional Indemnity insurance or 50 per cent of their previous year’s brokerage income, which enhances the protection for both brokers and their clients. This law encourages a higher standard of responsibility in the industry, ultimately benefiting consumers.”

Ezeibe stated that the funds are intended for the payment of unpaid claims admitted by, or allowed against, a licensed insurance or reinsurance company that becomes insolvent or has its licence cancelled by NAICOM.

As the situation evolves, it is crucial that NAICOM continues to communicate clearly with policyholders to restore confidence and ensure that the intent of these reforms providing a more secure and trustworthy insurance landscape is realised.