The Insurance Reforms Bill, recently advancing to its second reading in the Senate, proposes stringent penalties for companies engaging in insurance activities without proper licensing. Under the proposed legislation, unlicensed insurance operators could face a substantial fine of ₦50 million or a prison term of up to two years.
The bill outlines that individuals conducting insurance transactions without an official license will also be penalized. Such offenders could incur a fine of ₦25 million or face imprisonment for up to two years upon conviction. These provisions are detailed in Section 10 of the bill, titled “Operating an Unlicensed Insurance Business.”
Industry experts believe that if enacted, this legislation will significantly combat the issue of fraudulent insurance policies, which have been a persistent problem, undermining the industry and leading to substantial financial losses from policy counterfeiting.
Additionally, the bill stipulates increased capital requirements to participate in various insurance sectors. Specifically, it proposes a minimum capital base of ₦25 billion for non-life insurance underwriting, ₦15 billion for life insurance operators, and ₦45 billion for reinsurance firms. The National Insurance Commission (NAICOM) will be responsible for periodically determining risk-based capital requirements. This will involve evaluating factors such as insurance risk, market risk, credit risk, and operational risk, and applying relevant capital charges to assets and liabilities as needed.
