Insurance Comparative Guide – – Nigeria – Mondaq

The following legislative provisions govern the insurance sector in Nigeria:
The following regulatory provisions govern the insurance sector in Nigeria:

The Motor Vehicles (Third Party Liability Insurance) ECOWAS Brown Card Scheme, which was ratified by Nigeria on 21 June 1983 and enacted into law as MV ECOWAS with a commencement date of 11 July 1986.

The Central Bank of Nigeria (CBN) is responsible for accepting deposits of the paid-up share capital of insurance companies, as required by Section 10 of the Insurance Act.
The Corporate Affairs Commission is charged with regulatory oversight for, among other things, incorporating, supervising the operations and management of, and winding up/liquidating all Nigerian companies, including insurance companies, pursuant to Section 8 of CAMA.
The Economic and Financial Crimes Commission (EFCC) has the power to charge any person, corporate body or organisation for any offence it might have committed under the EFCC Act.
The Federal Competition and Consumer Protection Commission (FCCPC) is charged with ensuring fair competition among players in industry and the protection of consumers – who in this context are the insured and third parties to insurance contracts. The powers of the FCCPC under Section 18 of the FCCPA include the power to:
The Securities and Exchange Commission (SEC) is charged with registering and regulating the issuance and sale of securities of public companies, including shares to the public.
The Nigeria Reinsurance Corporation (Nigerian Re) has the power under Section 2 of the NRCA to:
The National Insurance Commission (NAICOM) is the primary regulatory body for the insurance industry in Nigeria. Under Section 7 of the NAICOM Act, it has the power, among other things, to:
PenCom is the major regulatory body charged with the supervision and effective administration of pension matters in Nigeria. It has the power to:
The Nigeria Deposit Insurance Commission is responsible for:
The Nigeria Content Development Monitoring Board is charged with the enforcement of the provisions of the Nigeria Oil and Gas Industry Content Development Act. Among other things, this sets out an obligation for all industries and business in the oil and gas industry to insure all insurable risks relating to oil and gas business, operations and contracts with an insurance company, through an insurance broker registered in Nigeria.
The Nigerian Agricultural Insurance Corporation is responsible, among other things, for implementing, managing and administering the Agricultural Insurance Scheme, which subsidises the premiums chargeable on selected crops and livestock policies.
The Nigerian Council of Registered Insurance Brokers is responsible, among other things, for:
The Nigerian Export-Import Bank was established to carry on the business of export credit guarantee and export credit insurance for goods that are to be exported under a confirmed export order.
The Federal Inland Revenue Service controls and administers taxes such as corporate income tax, value added tax, petroleum profit tax and the Education Trust Fund.
The NSITF has the power to carry out activities that are incidental or conductive to:
Section 5 of the Nigerian Investment Promotion Commission (NIPC) Act empowers the NIPC to do all things permitted by the act, such as:

Under Sections 3 and 16 of the Insurance Act, NAICOM adopts a ‘prior approval' approach to regulation. Under this approach, a company must be duly incorporated or established pursuant to law before commencing or carrying out any class of insurance business in Nigeria. Where such company is incorporated or established, approval for new products must first be sought and obtained before they may be introduced into any class or category of insurance.

Under Section 2 of the Insurance Act, there are two main classes of insurance business: life and general insurance businesses. Life insurance business is further classified into:
General insurance business is further classified into eight categories:

All insurance contracts are regulated by either the insurance policy, regulatory provisions or both. In accordance with Sections 1.3.12 and 1.3.13 of the Market Conduct and Business Practice Guidelines for Insurance Institutions, an insurance contract will typically include:
In the case of life insurance and annuities, the following additional information must be provided to the insured:

Except in the case of marine insurance (pursuant to Section 24(1) of the Marine Insurance Act, which provides that “subject to the provisions of any statute, a contract of marine insurance shall not be admissible in evidence unless it is embodied in a marine policy in accordance with the form in the First Schedule to this Act or to the like effect”), insurance contracts will be valid even when not in writing (Esewe v Asiemo [1975] NCLR 433 and Salako v Lombard Insurance Co Ltd [1978] 10-12 CCHCJ 215). The traditional requirements for a valid contract apply in all insurance contracts:
For insurance contracts to be concluded, there is a proposal form that contains the usual terms of the insurance. Depending on when the insurance policy will be issued by the insurer, a cover note is usually issued for a certain period. In marine insurance, a slip, which contains the particulars of the risk, is used instead of a cover note. Where a slip is used, it creates an insurance contract and an obligation on the insurer to issue the insurance policy according to the terms. The insurance policy, once issued, is conclusive evidence of an existing insurance relationship.

Upon execution of the insurance contract between the parties, the contract must be stamped in accordance with Sections 85 to 87 of the Stamp Duties Act. Breach of this requirement is an offence punishable by a fine.

The provisions of an insurance policy prescribe the respective obligations and liabilities of the parties, and the consequences of any breach of any of the terms in an insurance contract. Ordinarily, the insurance company is obliged:
Meanwhile, the insured is obliged to pay the premium as and when due.
Under Section 50 of the Insurance Act, failure to pay the premium in advance will make the insurance contract void and unenforceable. See also Jombo United Co Ltd v Leadway Insurance Co Ltd (2016) LPELR – 40831 (SC) at pp 15–16A-D per Sanusi, JSC.

The formal and documentary requirements for making a claim under an insurance contract are as per the terms of the insurance policy. Subject to the terms contained in the insurance policy, the claimant may use any swift means of communication to contact the insurer, a designated contact person or department or an intermediary – for example, by direct reporting, telephone call, text message, email, fax, letter, social media site or website, or any other form of technology that is widely used (Guideline 3.3.1 of the Market Conduct and Business Practice Guidelines for Insurance Institutions).

The procedure for making a claim is as stipulated in the terms of the insurance policy. The burden of proof rests on the insured to prove:
If the insurer declines to pay a claim due to an exclusion in the policy terms, the burden shifts to the insurer to prove the value of the loss. Upon notification by the insured to the insurer, the insurer may be issued a claim form (or an accident report form in the case of motor vehicle insurance). The claim form or accident report form will contain the particulars and the proof of loss to substantiate the claim.

The grounds for denial of the claim will be determined by the terms of the insurance policy. A claim may be denied where there is a breach of a fundamental term. For example, in Edokpolor & Co Ltd v Bendel Insurance Company Limited (1997) 1 SCNJ 172, it was held that false disclosure of the place of departure of the ship was a breach of warranty and therefore, the insurer was discharged from the liability. Others grounds include the following:
An insured can challenge the denial of a claim:
The insured can also make a complaint against the insurer through the National Insurance Commission's website at

Third parties can claim against the insurer by instituting an action against the insured and obtaining judgment. In the case of a motor vehicle claim, Section 10 of the Motor Vehicle (Third-Party Insurance) Act, and in other types of insurance, Section 69 of the Insurance Act, oblige the insurer to satisfy a judgment against the insured on third-party claims. Under the Insurance Act, the insurer is mandated to pay the judgment sum no later than 30 days from the date of delivery of the judgment.
Under both statutes, the insurer is not obliged to pay the third party:
The insurer is not obliged to pay a claim where:
However, the insurer will be bound by the judgment if the insured, through an application by motion ex parte, supported by an affidavit and written address for third-party proceedings, joins the insurer to bear eventual liability (Order 9, Rule 17 of the Federal High Court (Civil Procedure) Rules 2019; and Order 15, Rule 19 of the Lagos State High Court (Civil Procedure) Rules 2019).

Under Section 3 of the Insurance Act, there are two types of insurance companies:
Pursuant to the Circular on Minimum Paid-Up Share Capital Policy for Insurance and Reinsurance Companies in Nigeria (NAICOM/DPR/CIR/25/2019), issued by NAICOM on 20 May 2019, there are six types of insurance companies, based on the class of business:

The structure and funding of insurance companies vary depending on the type of insurance company. Insurance companies are primarily funded through shareholders' equity. Where the company is a private company, it cannot have more than 50 members; while listed insurance companies have more diverse membership (Sections 22(3) and 24 of CAMA). In practice, there may be a core investor/majority shareholder or a significant minority shareholder in such a public (listed) company. As it stands, all insurance companies other than those established by statute must comply with NAICOM's capital requirement stipulations.
Where the company is established pursuant to statute, the structure and funding of the company are determined by the enabling act. For example, Section 11 of the Nigeria Deposit Insurance Commission (NDIC) Act provides that the authorised capital of the NDIC is N5 billion, which must be subscribed by and paid-up at par in a proportion of 60:40 by the Central Bank of Nigeria and the Federal Ministry of Finance.

Under Section 17 of the Nigerian Investment Promotion Council Act, there are no restrictions on foreign ownership of insurance companies in Nigeria, as insurance does not fall under any of the items on the negative list set out in Section 31 of the act. Similarly, Section 3 of the Insurance Act does not discriminate regarding ownership of insurance companies insofar as a company is:
Similarly, Section 20(4) of CAMA provides that an alien or foreign company may join in establishing a Nigerian company.

An insurance company must:
Where the company intends to source its funds from the public, it must be listed on the Nigerian Stock Exchange and registered with the Securities and Exchange Commission. The incorporation of the company with the CAC under the Companies and Allied Matters Act (CAMA) confers the company with:
Registration of the company with NAICOM gives the company the requisite licence to engage in insurance business in Nigeria.

The initial requirements are follows:
Under Section 20 of CAMA, certain persons may not join in establishing a company. These include:
Upon incorporation by the CAC, the company must:

Company incorporation at the CAC, starting with an application for name check and reservation, takes between one and five days in practice, although the CAC has been advertising a 48-hour timeline for incorporation (from the point at which the executed incorporation documents are uploaded). Hopefully, this shorter timeline will become the norm, rather than the exception – especially following the launch of the CAC's new portal. The period for obtaining authorisation from NAICOM is not stated. Until a recent change in its management, NAICOM effectively banned the licensing of new insurance companies; this pro-registration stance is likely to be the preferred approach going forward.
Pursuant to Section 6 of the Market Conduct and Business Practice Guidelines for Insurance Institutions, the registration of insurance companies with NAICOM involves four stages. These stages and the respective requirements – which are set out on NAICOM's website at – are as follows:

Section 9 of the Insurance Act sets out the minimum capital requirements for the insurance industry, which are:
Section 9(4) of the Insurance Act empowers the National Insurance Commission (NAICOM) to increase, from time to time, the amount of minimum paid-up share capital for each category of insurance business.
In a bid to adopt a risk-based mechanism instead of the base capital system, NAICOM introduced the Tier Based Minimum Solvency Capital Policy in August 2018 (11 years after it carried out its last recapitalisation) through Circular NAICOM/DAPCIR/14/2018, which grouped insurance businesses into various tiers based on their capital requirements and risk levels. However, the policy fell through due to a lawsuit (Sir Nnamdi Nwosu v NAICOM, Suit FHC/L/CS/1483/18) instituted by aggrieved shareholders of some insurance companies, seeking to prevent its implementation.
On 20 May 2019, NAICOM introduced Circular NAICOM/DPR/CIR/25/2019 with the aim of recapitalising the insurance industry. The circular sets out the existing and revised minimum capital requirements for the insurance industry, as follows:
Due to complaints from industry stakeholders on the short timeline to comply, NAICOM on 30 December 2019 issued Circular NAICOM/DPR/CIR/25-03/2019, which extended the deadline for recapitalisation to 31 December 2020. Unfortunately, as the COVID-19 pandemic took a negative toll globally, NAICOM further extended and segmented the recapitalisation process into two phases through Circular NAICOM/DPR/CIR/25-04/2020, issued on 3 June 2020 and entitled “Segmentation of Minimum Paid Up Share Capital Requirement for Insurance Companies in Nigeria”. Pursuant to this Circular:
However, the recapitalisation met its waterloo when a court order was issued 10 days before the first tranche of the recapitalisation exercise was to take effect on 31 December 2020. The Incorporated Trustees of the Pragmatic Shareholders' Association of Nigeria had filed a motion on 15 December 2020 seeking an interim injunction order to restrain NAICOM from taking further steps to recapitalise the insurance industry. The Federal High Court (Aneke J) granted the order on 21 December 2020.

As stated in question 6.1, the liquidity requirements for life, general and composite insurance and reinsurance businesses have been increased from N2 billion, N3 billion, N5 billion and N10 billion respectively to N8 billion, N10 billion, N18 billion and N20 billion respectively. However, the implementation of the new liquidity requirements has been stalled by litigation.

The supervision of insurance groups is primarily carried out by the National Insurance Commission (NAICOM) pursuant to Section 6 of the NAICOM Act. In order to give NAICOM's supervisory role more context, Section 31 of the Act specifically highlights the supervisory requirements, which include:
Under Section 31(1)(a) of the NAICOM Act, the Inspectorate Department must, at least once every two years, authorise an inspection, examination or investigation of every insurance institution to ensure compliance with the NAICOM Regulations. Upon conclusion of the routine inspection, the inspector must submit a report on the inspection to the Commissioner. The Commissioner will send the report to NAICOM's Governing Board for consideration. A copy of the report and the Board's recommendation will be forwarded to the insurance institution, with an instruction that the report be placed before a meeting of the board of directors or the partners specially convened for the purpose of considering the report and recommendation. Within 14 days of receiving the report, the insurance institution must forward to NAICOM the board of directors' or partners' reactions to the report and proposals for implementing NAICOM's recommendations (Section 34).
NAICOM has the power to appoint one or more qualified persons, other than officers of NAICOM, to conduct a special inspection or investigation, under the condition of confidentiality, of the books and affairs of the insurance institution. After completing an inspection or investigation, the inspector must submit his or her report to the Commissioner within 30 days (Section 35). Every five years, an actuary appointed by NAICOM must conduct an investigation into the financial condition of the insurance institution and submit a report to the commissioner accordingly.

In a bid to ensure transparency in the insurance industry, certain industry standards were drawn up by the National Insurance Commission (NAICOM), which include:
The introduction of the Nigerian Code of Corporate Governance by the Financial Reporting Council of Nigeria (FRCN) pursuant to the FRCN Act harmonised all sectoral codes in the public and private sectors of the economy. Thus, there may be questions as to whether the new Corporate Governance Guidelines for Insurance and Reinsurance Companies is necessary at all; albeit at the very least, its provisions would have to be read in conjunction with the Nigerian Code of Corporate Governance. Principle 28 of the Nigerian Code of Corporate Governance requires “full and comprehensive disclosure of all matters material to investors and stakeholders, and of matters set out in this Code, ensures proper monitoring of its implementation which engenders good corporate governance practice”. As part of the practice recommendations, Principle 28.1 of the Code provides that: “the Board should ensure that the Company's annual report includes a corporate governance report that provides clear information on the Company's governance structures, policies and practices as well as environmental and social risks and opportunities.”
Also, Principle 28.2(a) of the Nigerian Code of Corporate Governance states that the company's corporate governance report must indicate the composition of the board of directors, stating the names and classification of:
This information must be on the company's website and included in its official publications.
Principle 28.3 of the Nigerian Code of Corporate Governance provides that the company must specify:
In such cases, the full details of the parties' names, the nature of the transaction and the monetary value involved in the transaction must be stated.
NAICOM has adopted the Nigerian Code of Corporate Governance disclosure requirements and included further provisions in the Corporate Governance Guidelines for Insurance and Reinsurance Companies in order to ensure full compliance by insurance industry stakeholders. Accordingly, Guideline 10.0 of the Corporate Governance Guidelines for Insurance and Reinsurance Companies states that the annual report of the company must sufficiently disclose:
The Prudential Guidelines for Insurance and Reinsurance in Nigeria also impose disclosure obligations on insurance companies. In alignment with International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS), Prudential Guideline 7.14 provides for the disclosure of the sub-classification of line items in the notes, and not in the statement of financial position. Prudential Guideline 7.15 states that insurers must disclose elements of equity as required by IAS 1.79 in the notes to the financial statement. Prudential Guideline 7.21 applies to the disclosure of dividends distributed to the owners. The same disclosure obligation applies with regard to:

The major reporting obligations in Nigeria are focused on periodic reports:
The reporting requirements also cover:
Internal audit and external auditors: Guideline 5.0 of the Corporate Governance Guidelines for Insurance and Reinsurance Companies provides that insurance and reinsurance companies must have a separate internal audit unit (IAU). The IAU is expected to file quarterly reports to NAICOM. It must be headed by a professionally qualified accountant not below the rank of an assistant general manager or the equivalent; while the report of the external assessment of internal audit functions must be submitted to NAICOM no later than the second quarter of the following year.
As part of the insurance company's obligations, NAICOM's prior approval is required for the appointment of external auditors. The external auditors' tenure is for four years, subject to renewal for one further period of four years. The audit team must be rotated at least once every two years (Guideline 6.0 of the Corporate Governance Guidelines for Insurance and Reinsurance Companies). Similarly, Principle 20 of the Nigerian Code of Corporate Governance provides for the appointment of an external auditor to give an independent opinion on the true and fair view of the financial statements of the company, to give assurance to shareholders on the reliability of the financial statements.
If an auditor resigns, Section 413 of the Companies and Allied Matters Act (CAMA) empowers the auditor to convene a company meeting for the purpose of receiving and considering such explanation of the circumstances connected with his or her resignation as he or she may wish to submit to the meeting. The auditor may request the company to circulate his or her notice of resignation to its members before the general meeting. If, within 21 days of receipt of a request to convene a meeting, the directors fail to do so within 28 days of the date on which the notice convening the meeting is given, every director is liable to such penalty as the Corporate Affairs Commission shall specify in its regulations (Section 413(4) of CAMA).
Audited financial statements and annual returns: Similarly, Prudential Guideline 2 provides that an insurer must submit its audited financial statements and annual returns to NAICOM on or before 30 June of the following year. The filing must be in hard copy and accompanied by a soft copy in Excel format. In addition, Prudential Guideline 2.5 states that an insurer shall be deemed to have failed to file its annual returns if the provisions of Section 26 of the Insurance Act (statement of accounts) are not met within 12 months of the end of the financial year.
Under Prudential Guideline 2.10, NAICOM's approval is required regarding the insurance company's annual returns and accounts before consideration by the shareholders at the annual general meeting. The insurance company must not publish its financial statement in any national newspaper, except as stipulated in Sections 26(4) and 27(6) of the Insurance Act, which stipulates that with NAICOM's approval, the insurance company can publish its general annual balance sheet together with its profit and loss accounts in at least one national newspaper in Nigeria.
IFRS harmonisation carve-outs and regulatory requirements: NAICOM has adopted the IFRS standard which offers the Nigerian insurance industry the opportunity to operate at par with international standards, especially in order to ensure that insurance companies' financial statements are acceptable and to attract foreign investors to the industry. IFRS adoption also aims to minimise the inconvenience and cost generated by the lack of homogeneity in the Nigerian insurance industry. It also helps by creating a uniform system of accounts and standard statistical code for the industry (Prudential Guideline 7). Prudential Guideline 7.9 concerns the frequency of reporting to NAICOM, which must be quarterly. Insurance companies may be required to produce monthly management account.
Outsourcing reporting requirements: Prudential Guideline 9.1(a) defines ‘outsourcing' as an “insurer's use of a third party (either an affiliated entity within a corporate group or an entity that is external to the corporate group) to perform activities on a continuing basis that would normally be undertaken by the insurer itself, now or in the future”. Further to Prudential Guidelines 9.2.2 and 9.2.7, a written, board-approved outsourcing policy is required prior to carrying out outsourcing activities with a third party, which is underscored by a written contract. Prudential Guideline 9.2.9 requires that outsourced activities be reported to NAICOM within 30 days of the date of entering into such outsourcing agreement and thereafter biannually. Other reporting obligations include:

Conflicts of interest: Under Guideline 7.0 of the Corporate Governance Guidelines for Insurance and Reinsurance Companies, each director and employee of an insurance or reinsurance company must formally disclose to the board of directors or shareholders his or her interest in any:
Any payment of commissions or fees to any of the above listed in which any director or an employee has any interest whatsoever must be fully documented and the interest therein fully disclosed to the board/shareholders.
Section 306 of CAMA provides that a director's personal interest must not make any secret profit or achieve other unnecessary benefit in conflict with his or her duties in the course of the management of the affairs and utilisation of the company's property. A director is expected not to misuse corporate information even after he or she has resigned from the company; he or she remains accountable and can be restrained by an injunction from misusing information received by virtue of his or her previous position. If a director discloses his or her interests before the transaction and before the secret profits are made before the general meeting, which may or may not authorise any resulting profits, he or she may escape liability. However, he or she will not escape liability by disclosing only after he or she has made the secret profits; in this case, the director must account for the profits. His or her fiduciary duties shall not be derogated in case of multiple directorships (Section 307 of CAMA).
Whistleblowing: Guideline 11 of the Corporate Governance Guidelines for Insurance and Reinsurance Companies protects the rights of a whistleblower by giving that person the opportunity to present a complaint to NAICOM if he or she has been subjected to any detriment. This is in line with Principle 19 of the Nigerian Code of Corporate Governance, which provides for an effective whistleblowing framework for reporting any illegal or unethical behaviour, to minimise the company's exposure and prevent recurrence. Principle 19.6 of the Nigerian Code of Corporate Governance further states that a whistleblower who has suffered detriment may present a complaint to the board and/or regulators, and may be entitled to compensation and/or reinstatement as appropriate. ‘Detriment' in this circumstance includes dismissal, termination, demotion, retirement, redundancy, undue influence, duress, withholding of benefits and/or entitlements, blacklisting, withdrawal of patronage and any other act that has a negative impact on the whistleblower (Principle 29.1.7 of the Nigerian Code of Corporate Governance).

The key risk managements applicable in Nigeria are clearly explained under the Nigerian Code of Corporate Governance, the Corporate Governance Guidelines for Insurance and Reinsurance Companies and the Prudential Guidelines. The board is expected to establish a standalone committee responsible for the company's risk management framework.
Under Principle 11.5 of the Nigerian Code of Corporate Governance (akin to Prudential Guideline 6.2(f)), the board is expected to establish a committee responsible for risk management and the membership should include the executive directors and the non-executive directors. The non-executive director must be a majority in the committee. The chairman must be a non-executive director, and the committee meet at least twice every financial year and at such other times as may be appropriate to discharge their duties.
The board is also saddled with responsibility for establishing a risk management framework that:
Principle 18 of the Nigerian Code of Corporate Governance (akin to Risk Management Appendix 1 of the Prudential Guidelines) enables the internal audit function to provide assurance to the board on the effectiveness of the risk management and internal control system. The Corporate Governance Guidelines for Insurance and Reinsurance Companies provisions are in pari materia to the Nigerian Code of Corporate Governance – particularly Guidelines 2.03 and 2.04, which impose a responsibility and duty on the board to review corporate strategy and risk policy, and monitor potential risks within the company.
Prudential Guideline 6.2(a) explains what the risk management framework should entail, as follows:
The risk management framework is expected to address all material risks, including the following:
The implementation of the risk management framework must be handled by a senior manager of the company who reports to the board (Prudential Guideline 6.2(e)). The same applies under Principle 11.5.7 of the Nigerian Code of Corporate Governance; however, the senior manager is expected to report directly to the managing director/chief executive officer, and should have an indirect reporting line to the committee responsible for risk management.
Prudential Guideline 6.3.2 identifies three major risk management processes:

Based on the Corporate Governance Guidelines for Insurance and Reinsurance Companies, the management structure of insurance companies consists of:
Guideline 2.01 of the Corporate Governance Guidelines for Insurance and Reinsurance Companies stipulates that the board of directors and management (board) should be structured in a way that instils confidence in the shareholders and management. In view of this, the board composition of an insurance or reinsurance company must have not less than seven members and not more than 15 members. The board must consist of executive and non-executive directors, of whom not more than 40% of the members must be in the executive capacity. More so, Guideline 2.01 of the Corporate Governance Guidelines for Insurance and Reinsurance Companies further states that at least one independent non-executive director who does not represent any particular shareholding interest or hold any business interest should be included as a member of the board.
For succession purposes, Guideline 2.01(xii) of the Corporate Governance Guidelines for Insurance and Reinsurance Companies mandates that insurance and reinsurance companies must have an executive director (technical), who must have minimum qualifications and experience equivalent to those of the CEO. In order to protect the interests of minority shareholders, Guideline 2.01(xiii) of the Corporate Governance Guidelines for Insurance and Reinsurance Companies provides that all public limited liability insurance and reinsurance companies must provide a seat for minority shareholders on the board. In line with Principle 2.7 of the Nigerian Code of Corporate Governance, no one person shall occupy the position of chairman and managing director/CEO in related insurance companies at the same time. Also, no two members of the same family (nuclear and extended) shall occupy the position of chairman and managing director/CEO of any insurance company.

To protect shareholders' rights, Principle 23.1 of the Nigerian Code of Corporate Governance gives the shareholders effective powers to appoint and remove directors of a company during the annual general meeting. The Corporate Governance Guidelines for Insurance and Reinsurance Companies do not state how the directors and executives are appointed (except for the non-executive directors, whose appointment shall be determined by the board through a defined selective process); however, Guideline 2.01 provides that the National Insurance Commission (NAICOM) must approve the appointment of the CEO and the executive directors (who must be members of the board throughout their tenure). The non-executive directors may not be re-nominated and appointed for more than three terms of three years each; while all nominated members of the board must complete and file with NAICOM a personal history statement form at the point of application to NAICOM (Guideline 2.01(xiv) of the Corporate Governance Guidelines for Insurance and Reinsurance Companies).
Guideline 2.02 of the Corporate Governance Guidelines for Insurance and Reinsurance Companies highlights the applicable selection criteria, as follows:
Similarly, Principle 12 of the Nigerian Code of Corporate Governance provides that the board must approve the criteria for appointing directors as recommended by the committee responsible for nomination and governance. The shareholders are to be provided with the biographical information of the proposed directors.

Guideline 2.03 of the Corporate Governance Guidelines for Insurance and Reinsurance Companies (akin to Section 305 of the Companies and Allied Matters Act) sets out the directors' duties, which include the following:
Furthermore, Principle 11 of the Nigerian Code of Corporate Governance highlights the various committees to which the board may delegate some of its functions without abdicating its responsibilities. According to Principle 11.2 of the Code, only directors may be members of board committees; while members of senior management may be required to attend the committee meetings. The committees perform various responsibilities, which include:

The board will determine the directors' remuneration and seek approval at the annual general meeting, pursuant to Guideline 2.06(iv) of the Corporate Governance Guidelines for Insurance and Reinsurance Companies. The shareholders have the right to make known their views on the remuneration policy for board members and key executives of the company (Guideline 8.0(ii) of the code). In the same vein, Principle 16.5 of the Nigerian Code of Corporate Governance states that the remuneration of non-executive directors shall be fixed by the board and approved by the shareholders in general meeting.
Also, Principles 16.6, 16.7 and 16.11 of the Nigerian Code of Corporate Governance provide that the managing director/CEO and executive directors' compensation should:
They should not be involved in the determination of their remuneration; and they are not entitled to any sitting allowances for attending board or committee meetings, or to directors' fees from the company, its holding company or subsidiaries. Their remuneration should, however, recompense them for time spent on the board, its committees and related work.
To avoid any bias in the non-executive directors' decision making, Principles 16.12 and 16.13 of the Nigerian Code of Corporate Governance do not allow performance-based compensation. The non-executive directors may be paid sitting allowances, directors' fees and reimbursable travel and hotel expenses, which must be disclosed in the company's annual report. The company may pay compensation to the directors for loss of office or retirement. If the managing director/CEO, executive directors and senior management suffer a loss of office or termination of appointment, the company may compensate them; such compensation should be consistent with their contractual terms, fair and not excessive, subject to the provisions of applicable laws (Principle 16.14 of the code).

The methods and procedural requirements for effecting the transfer of assets and liabilities of insurance companies are set out in sectoral legislation (eg, the Insurance Act) and general legislation (eg, the Federal Competition and Consumer Protection Act (FCCPA), the Investment and Securities Act and the Companies and Allied Matters Act (CAMA)). Thus, the assets and liabilities of insurance companies in Nigeria can be transferred through:
Transactions can involve the acquisition of either an insurance company itself or of a class (part) of its insurance business.
Such transactions require both the National Insurance Commission's (NAICOM) prior approval and sanction of the court (Section 30(1) of the Insurance Act). Where the Federal Competition and Consumer Protection Commission's regulatory oversight is triggered, transaction consent will also be required. Before NAICOM approves such transfer, it will request all statements, documents and other information that will assist it in reaching its decision (Section 30(2) of the Insurance Act). As part of the requirements for any application for court sanction of a transaction or NAICOM's approval, the insurance company must publish notice of its intention to make the application, together with a statement of the nature of the transaction, in at least five national newspapers and serve such notice on NAICOM at least three months before the application is made (Section 30(4) of the Insurance Act).
Under Sections 30(5), (6) and (7) of the Insurance Act, certified true copies of the documents regarding the transfer must be kept open for inspection by the members and policy holders at the principal and branch offices of the insurance companies concerned. The insurance companies must make available the deed or agreement under which the transfer is proposed for inspection free of charge to the policy holders and shareholders for a period of 21 days after publication in the newspapers. NAICOM or the court has the discretion to approve or sanction the transfer if it is satisfied that no sufficient objection has been established by those entitled to be heard.

Within three months of execution of the transfer of business, the insurer must furnish in duplicate to NAICOM the following:
Section 92 of the FCCPA also make provision for merger through which one or more undertakings directly or indirectly acquire or establish direct or indirect control over the whole or part of the business of another undertaking. However, an undertaking shall not be deemed to exercise control over the business of another undertaking where:
(a) credit institutions or other financial institutions or insurance companies, the normal activities of which include transactions and dealing in securities for their own account or for the account of others, hold on a temporary basis securities which they have acquired in an undertaking with a view to reselling them, provided that they do not exercise voting rights in respect of those securities with a view to determining the competitive behaviour of that undertaking or provided that they exercise such voting rights only with a view to preparing the disposal of all or part of that undertaking or of its assets or the disposal of those securities and that any such disposal takes place within one year of the date of acquisition; that period may be extended by the Commission on request where such institutions or companies can show that the disposal was not reasonably possible within the period set; or (b) control is acquired by an office-holder according to the laws of the Federation relating to liquidation, winding up, insolvency, cessation of payments, compositions or analogous proceedings.
Transactions involving insurance companies are likely to be above the ‘small merger' threshold and will therefore require notification to the Federal Competition and Consumer Protection Commission (FCCPC) (Sections 92(4)(a), 93(4) and 95 of the FCCPA; FCCPA Notice of Threshold for Merger Notification). ‘Amalgamations' that result in change in control must be notified to the FCCPC unless the combined annual turnover or the turnover of the target is less than N1 billion or N500 million respectively. Where the company is a publicly listed company, the Securities and Exchange Commission (SEC) has an oversight function regarding such restructuring; hence, the approval of the SEC must also be obtained.
Once the requisite approvals have been obtained, the change of control must be formalised by filing the requisite corporate documentation with the Corporate Affairs Commission (CAC) (board resolutions approving the transfer of shares and changes in board composition; executed directors' resignation letters; and executed CAC Form 7A. Currently, the Companies Regulations 2021 made pursuant to CAMA include no provisions on filing for the transfer of shares; in fact, CAC Form 2 has been designated differently. However, we believe that the CAC will provide clarity in this regard shortly).

The Market Conduct and Business Practice Guidelines for Insurance Institutions issued by the National Insurance Commission (NAICOM) pursuant to the NAICOM Act and the Insurance Act set out the minimum standards required from insurance institutions in their dealings with clients, policyholders, shareholders and other stakeholders in Nigeria. For instance, Guideline 1.1.0 prohibits insurance institutions from engaging in unfair trade practices, which include:
Other important provisions that protect consumers' interest include:

In order to protect consumers and policyholders' funds, Prudential Guideline 1.2 states that an insurance company must:
Prudential Guideline 1.3 further provides for ring-fencing actions whereby the custodians of financial assets (including bankers) and/or managers of relevant title registries (eg, land registries, Central Securities and Clearing Systems Plc and company registrars) must register (in writing) the interest of policyholders in the assets with the following notation:
Section 39 of the Federal Competition and Consumer Protection Act (FCCPA) established the Competition and Consumer Protection Tribunal, which adjudicates over conduct that is prohibited under the FCCPA. The jurisdiction of the tribunal extends to reviewing and hearing appeals decisions through which any sector-specific regulatory authority in a regulated industry exercises its powers in respect of competition and consumer protection matters (Section 47(1)(b) of the FCCPA).

The applicable data protection regime in Nigeria is set out in the following statutes:
The following regulations and guidelines are also of relevance in this regard:
In today's world, data is king; it is regarded as ‘the new gold/oil', or ‘the new currency'. A blog post of data analytics service provider Ekran System, entitled “Data Protection Compliance for the Insurance Industry”, states: “personal data is the lifeblood of insurance services, as only comprehensive and accurate information about clients allows insurance companies to provide viable and sustainable offerings… If banks hold the money, insurance companies hold the data.”
Nigerian insurance companies cannot afford to be caught in a web of data fraud or compromise because of their massive dependence on data. Article 1.2 of the NDPR brings within its ambit players in the insurance sector insofar as their transactions involve personal data collection and/or processing, including:
Further guidance for insurance companies is set out in the CPF, which requires them to ensure adequate protection of customer data. Sector-specific rules for the insurance industry are contained in Guidelines 1.1.0, 1.2.0, 1.30, 1.8.0, 1.90, and 1.10.0 of the Market Conduct and Business Practice Guidelines for Insurance Institutions (see question 11).
Players in the insurance sector must comply strictly with these requirements; otherwise, they could be subject to the applicable penalties. As data processors/controllers, they are responsible for the acts and omissions of their officers/representatives who directly handle the data rights of data subjects. Insurance companies must also display their privacy policies on insurance documents identified for the collection and processing of data. The consequences of non-compliance are grave (a minimum fine of N10 million for companies that process the data of more than 10,000 data subjects), which encourages strict adherence. The appointment of a designated data protection officer is compulsory.
The enactment of the NDPR is a welcome development, but it seems that most of the regulations contained therein are directed towards consent, as well as data protection administration and procedure. There is thus significant room for improvement in terms of the technical aspects of data crime and fraud prevention, which could very well be better achieved through sector-specific regulations in this regard.

The applicable cybersecurity regime in Nigeria is set out in the following legislation:
Section 19(3) of the Cybercrimes Act imposes a duty on financial institutions to put in place effective counter-fraud measures to safeguard customers' sensitive information, which includes personal data. Given the latest advancements in technology and globalisation, almost all business operations have now pivoted around remote access.
Given the extent of exposure to this risk, cyber-risk insurance policies are increasingly being offered by some Nigerian insurance companies. One insurance executive reportedly said:
Cyber-risk insurance policies have been robustly reengineered for organizations and individuals in the face of rising cyber-attacks and fraud on businesses, …cyber-risks insurance policy is now optimised to provide first-party coverage and third-party liability risk covers on cyber-perils for organisations, while the individual policy coverage is on the verge of introduction into the market once approved by the National Insurance Commission.

The applicable provisions on money laundering include the following:
In 2011, the National Insurance Commission (NAICOM) set up an AML and counter-terrorist financing (CFT) compliance unit to eliminate money laundering and terrorist financing in the insurance industry. The major objective was to ensure that financial institutions were neither controlled by criminals nor misused for criminal purposes. The AML/CFT Guidelines and Guidance Note for the Insurance Industry were revised and gazetted in the National Insurance Commission (Anti-Money Laundering and Countering the Financing of Terrorism) Regulations, 2013, with the aim of regulating and ensuring compliance with the AML and CFT statutes by the industry.

It is widely agreed that Nigeria's insurance sector has significant growth potential. In order to boost its significance to society at large, increase the country's insurance penetration rate and close the gap with its African peers, the National Insurance Commission (NAICOM) implemented the Market Development and Restructuring Initiative, 2011, the second phase of which was launched in 2017. The initiative aims to promote the full implementation of at least eight different compulsory types of insurance as provided for by law, as follows:
One reason for this is the desire to boost pro-competitive tendencies within the market.
NAICOM has also made further attempts to directly and indirectly increase the insurance penetration rate through:
Insurance brokers also help to promote competition by seeking the most beneficial packages for their blue-chip clients, often through beauty parades and competitive bid processes. Despite these laudable strategies, the industry still faces challenges. According to one industry expert: “The insurance industry in Nigeria is gasping for breath – not just because the general economy is struggling, but mostly for the cuts it has dealt itself.”
The challenges that the insurance sector faces from a competition perspective include the following:
There is no sector-specific pro-competition legal framework in Nigeria, although there have been calls for the enactment of a dedicated legal scheme to strengthen competition in the insurance sector. Market commentators recognise that competition is the lifeblood of a strong, effective insurance sector. Prior to the enactment of the Federal Competition and Consumer Protection Act (FCCPA), there were no particular competition or antitrust laws in Nigeria; what existed were non-sectoral anti-competitive rules, as contained in the pre-2020 Companies and Allied Matters Act and the Investment and Securities Act.
In 2019, the FCCPA was enacted, establishing the Federal Competition and Consumer Protection Commission (FCCPC) to oversee consumer protection and competition issues in relation to all entities in Nigeria, including private and public organisations, as well as government agencies and bodies.
The FCCPA has supremacy in all competition and consumer protection matters, subject to the provisions of the 1999 Constitution; and it applies in all regulated industries, including insurance. While acknowledging the concurrent jurisdiction of the FCCPC, NAICOM and the Securities and Exchange Commission in such matters, the FCCPA confers precedence on the FCCPC (Sections 104 and 105(1) and (2) of the FCCPA).

The main provisions on corporate insolvency in Nigeria are contained in the recently enacted Companies and Allied Matters Act (CAMA), which improves on those set out in its 2004 predecessor. The Bankruptcy and Insolvency (Repeal and Re-enactment) Bill 2016, which aimed to repeal the Bankruptcy Act, Cap B2, LFN 2004, has not yet been passed. However, there are sector-specific rescue framework provisions in:
First, insurance companies are required under the law to maintain a solvency margin (Sections 24(1), (5), (6) and (7) of the Insurance Act). Non-compliance with this requirement will culminate in:
In 2020, the National Insurance Commission (NAICOM) liquidated Investment and Allied Insurance Company and Springlife Insurance Company. The commissioner for insurance, Mr Sunday Thomas, said that the liquidated companies had been under receivership for 10 years and that their licences had been withdrawn since 2018. Similar actions were taken against 14 companies in 2004 and seven companies in 2008, although the conclusion of these liquidations remain hazy.
Second, insurance companies are excluded from conventional insolvency proceedings, but follow the procedure for liquidation set out in the Insurance Act where NAICOM approves a petition filed by a minimum of 50 policyholders presented to the court under Sections 32(1)(a) and (2) of the act. In fact, a life insurance company is prohibited from voluntary winding up (Section 33 of the Insurance Act), except in the case of amalgamation, transfer or acquisition under the Insurance Act. To further protect customers, a Security and Development Fund was established by law under Section 78(1) of the NAICOM Act, which is used for the payment of:

The Nigerian insurance market is currently underperforming, but has great future potential. Following a change in the management of the National Insurance Commission (NAICOM) in April 2020, expectations of a more collaborative regulatory approach are high, given the pro-industry development mindset of the new leadership. Developments and trends worthy of note include the following.
NAICOM has promising strategic plans to move the industry forward, but the implementation of these plans must be efficient and effective. The strategic plans are aimed at:
NAICOM aims to promote the stability of the insurance sector by:
It further aims to optimise the development of the insurance market by:
Additional aims of NAICOM include:
As in many emerging markets, the insurance outlook for Nigeria is positive, due to the low insurance penetration rate. For example, between 2014 and 2018, the oil and gas sector grew at a rate of 9% per annum, and marine and aviation at a rate of 10% per annum. In 2018, oil and gas insurance and marine and aviation insurance accounted for 34% and 11% respectively of non-life gross premiums. It is therefore unsurprising that Nigeria is experiencing a gradual increase in foreign participation in the industry, with the entrance of international underwriters. According to NAICOM, more than 12 foreign investors entered the country between 2012 and 2018. Major deals included the following:
The market has also seen a lot of activity by private equity investors.
In March 2021, NAICOM published its Corporate Governance Guidelines for Insurance and Reinsurance Companies in Nigeria, which will take effect from 1 June 2021. Replacing the Code of Good Corporate Governance for the Insurance Industry in Nigeria of 2009, the guidelines were issued in collaboration with the Financial Reporting Council of Nigeria with the aim of assisting in the implementation of the Nigerian Code of Corporate Governance, and should therefore be read in conjunction therewith.
In November 2020, NAICOM issued five new underwriting licences to:
This, in addition to the influx of foreign underwriters and the recent licensing of microinsurance companies in Nigeria, is projected to intensify competition among operators.
The enactment of the Finance Act (1/2020) removed the discriminatory tax regime applicable to insurance companies, to the great relief of stakeholders. As a result of the amendment of the Companies Income Tax Act, insurance companies can now carry forward losses indefinitely – unlike under the pre-existing law, which specified a four-year limitation period. Although there is still room for improvement, the changes have reduced the ambiguity with respect to the tax treatment of the insurance sector, and will improve the ease of doing insurance business in Nigeria and make the sector more attractive for investment. The successor Finance Act (2/2020) continued with this new practice of ensuring that the insurance sector receives equal treatment to other sectors.
Meanwhile, non-traditional insurance product offerings are increasingly being introduced, such as:
In 2019 NAICOM licensed GOXI and Casava Microinsurance to operate as composite microinsurance companies in Lagos State only. In December 2020, through Circular NAICOM/DPR/CIR/32/2020, NAICOM authorised conventional insurance companies to carry out microinsurance operations once they have met the stipulated requirements.
NAICOM's two recent recapitalisation initiatives, which have both been stalled by litigation, are discussed extensively elsewhere in this Q&A (see question 6.1 on the minimum capital requirements for the insurance industry). Many companies that were below the requisite capital thresholds had commenced fundraising efforts or were considering consolidation before the current litigation-induced stay of action.
Other new developments include the following:
Given the low insurance penetration rate, Nigeria's demographics and the resulting pent-up demand, the Nigerian insurance market has indisputable potential. This should be good news for current players, prospective investors and new market entrants.

Industry experts suggest the following top tips for players in the Nigerian insurance sector:
Meanwhile, the COVID-19 pandemic has:
Further potential sticking points include the following:
Co-Authored by Adefunke Mukoro and Gabriel Omoniyi
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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