Minimum Capital Requirement for Insurance Companies in Nigeria

How much money should an Insurance company have to start operations in Nigeria? That question is what we are going to digest at the moment. Grab a coffe!

In Nigeria, insurance companies operate under a distinct regulatory framework when it comes to capital requirements. Unlike regular businesses governed by the Companies and Allied Matters Act (CAMA), the Insurance Act, NAICOM Guidelines, and other related regulations set specific minimum capital thresholds for insurance operations.

The National Insurance Commission (NAICOM), established under the NAICOM Act of 1997 and guided by the Insurance Act of 2003, is the principal regulator of the Nigerian insurance industry. It has the statutory power to supervise, control, and, importantly, adjust the minimum paid-up share capital required for operating insurance businesses in Nigeria.

This article outlines both the historical and current minimum capital requirements as set by NAICOM for various types of insurance businesses.

Historical Minimum Capital Requirements (Pre-May 2019)

Prior to the 2019 review by NAICOM, the minimum paid-up share capital requirements were as follows:

Life Insurance Business – ₦2 billion
General Insurance Business – ₦3 billion
Composite Insurance Business (offering both life and general) – ₦5 billion
Reinsurance Business – ₦10 billion

These requirements were meant to ensure operational solvency and build public trust, but NAICOM later determined that a capital increase was necessary to strengthen the sector and align with global best practices.

Updated Capital Requirements (Effective from May 20, 2019)

In May 2019, NAICOM announced a new capital regime for insurance and reinsurance companies in Nigeria. The new minimum Capital requirement for Insurance companies in Nigeria now stands at:

Life Insurance Business – ₦8 billion
General Insurance Business – ₦10 billion
Composite Insurance Business – ₦18 billion
Reinsurance Business – ₦20 billion

These figures reflect NAICOM’s vision for a financially stronger and more resilient insurance sector. All new applicants and existing companies are expected to comply with these revised capital thresholds.

Why Was This Change Made?

The upward review was driven by several key objectives:

To strengthen financial solvency and protect policyholders
To align Nigerian insurance operators with international best practices
To reduce the risk of insurance company failures
To attract foreign investment by building confidence in the sector
To improve the capacity of local insurers to underwrite large and complex risks

Laws and Regulatory Bodies Governing the Aviation Sector in Nigeria

Regulatory Authority

The authority for these changes is drawn from the:

National Insurance Commission Act (1997)
Insurance Act (2003)

NAICOM retains the legal backing to review and enforce these capital thresholds periodically, ensuring that the industry evolves with economic realities and global trends.

Conclusion

Whether you’re planning to set up an insurance business in Nigeria or you’re an existing operator, compliance with NAICOM’s capital requirements is non-negotiable. Understanding these thresholds helps ensure your operations are fully compliant and well-positioned for growth in the Nigerian insurance market.

Need Legal Guidance?

At Tcorporate Legal Advisory, we specialize in helping clients navigate regulatory requirements for insurance licensing, CAC registration, and NAICOM compliance. Let us simplify the legal process so you can focus on building a strong and sustainable business.