Insurers warned recapitalisation may fail without stronger corporate governance

The National Insurance Commission has said that higher capital alone cannot guarantee financial stability, urging boards to strengthen risk management and protect shareholders’ funds

The Commissioner for Insurance and Chief Executive of NAICOM, Olusegun Omosehin, said raising additional capital was only the first step towards building financially resilient insurance institutions, stressing that the ability to protect and effectively deploy the funds would determine the industry’s long-term stability.

He spoke at the eighth Annual Insurance Directors’ Conference, organised by the College of Insurance and Financial Management in collaboration with NAICOM in Lagos on Thursday. The conference was themed, ‘Recapitalisation to Resilience: Leading the Risk-Based Capital Era’.

Omosehin said the industry must move beyond meeting minimum capital requirements to building institutions capable of withstanding economic shocks, technological disruptions and emerging business risks.

He warned that poor governance, weak internal controls, inappropriate investments and ineffective risk management could undermine even well-capitalised insurance companies.

“Recapitalisation was never the destination; it is the gateway to a more demanding phase — a phase that will be defined not by the size of capital alone, but by how that capital is governed, protected, deployed and aligned with risk,” he said.

The commissioner explained that the transition to the risk-based capital framework would fundamentally change how insurance companies are assessed and supervised, as regulators would increasingly examine whether their capital levels were adequate relative to the risks they undertake.

He distinguished between the minimum capital requirement, which represents the minimum funds an insurer must maintain to operate its licensed business, and risk-based capital, which considers the nature, size and complexity of the risks carried by each institution.

Under the framework, he said, an insurance company could meet its prescribed minimum capital requirement but still have insufficient capital to support its actual risk exposure.

Omosehin said NAICOM would therefore pay greater attention to the quality of capital, corporate governance, risk management systems, financial reporting and insurers’ ability to meet claims obligations.

He added that successful recapitalisation would not shield operators from continuous regulatory scrutiny, urging companies to maintain accurate financial records and submit reliable and timely information to the commission.

He warned that capital could be depleted through poor underwriting decisions, excessive operating expenses, inappropriate investments and uncontrolled business expansion.

Speaking at the conference, the President of the Chartered Insurance Institute of Nigeria, Akinjide Orimilade, said the new regulatory environment would place greater responsibility on directors, chief executives and key management personnel.

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He said the industry must move beyond simply satisfying statutory requirements, noting that directors could be held accountable when poor oversight and failure to exercise reasonable care exposed their institutions to serious risks.

Orimilade identified directors’ qualifications, experience, character, board independence, committee effectiveness and related-party transactions as critical areas requiring attention under the new regulatory framework.

He also stressed the importance of regular board assessments and compliance with NAICOM’s fit-and-proper requirements, warning that board membership should not be treated as an honorary position.

According to him, the Nigerian Insurance Industry Reform Act, signed into law on 31 July, 2025, represents a major overhaul of the country’s insurance legislation and provides the foundation for the industry’s transition.

He disclosed that about 50 insurance operators had met the new recapitalisation thresholds, with statutory capital of approximately N715bn reported by NAICOM.

In his remarks, the Special Adviser to the President on Economic Affairs, Tope Fasua, said the industry must strengthen public confidence, deepen insurance penetration and improve operational efficiency as it enters the post-recapitalisation era.

He said changing customer expectations, technological innovation, emerging risks and evolving regulatory requirements required insurance companies to rethink their business models and strengthen their institutional capacity.

Fasua urged industry leaders to use the conference to develop practical strategies for improving governance, expanding insurance coverage and positioning Nigerian operators for long-term sustainability.

Similarly, the Minister of Finance, Taiwo Oyedele, represented by Special Adviser on Public Finance, Greg Ezeilo, said a resilient insurance industry was essential to Nigeria’s economic development because of its role in mobilising long-term capital, protecting businesses and households, and supporting productive investments.

He said insurance companies could contribute more to infrastructure financing, agriculture, manufacturing and trade if they developed the financial and institutional capacity to underwrite emerging risks.

Oyedele identified stronger corporate governance, wider insurance access, technology adoption, improved risk management and investment in human capital as key priorities for the sector.

He also called for affordable and accessible insurance products for households, small businesses, farmers and underserved communities, stressing that insurance should become an everyday financial protection mechanism rather than a privilege for a limited segment of the population.