A transformative phase is on the horizon for Nigeria’s insurance industry, as insurers are expected to inject approximately N600 billion in fresh capital to meet evolving regulatory demands. This projection, outlined in the 2025 Nigerian Insurance Industry Report released by Agusto & Co., is driven by the anticipated passage of the Nigeria Insurance Reform Bill, which is expected to overhaul the industry’s regulatory framework by the end of 2025.
The report highlights that the upcoming legislation will fast-track the transition to a risk-based capital framework, significantly impacting the capitalisation of insurance firms. With an increase in the minimum capital requirements for various business segments, insurers will be compelled to strengthen their financial base, which will, in turn, enhance underwriting capacity and risk retention.
“The Nigeria Insurance Reform Bill, which seeks to overhaul the industry’s regulatory framework, is expected to be passed into law before 31 December 2025. We believe the Bill would compel the National Insurance Commission to fast-track the transition to a risk-based capital regime,” the report stated. “This legislation would significantly impact the industry’s capitalisation, with an estimated N600 billion capital injection to comply with the new requirements.”
While insurers will be allowed to recapitalise over time, the report anticipates heightened activity to shore up capital bases in FY 2025. This recapitalisation process is expected to reshape risk underwriting activities in the short term, as insurers work to generate adequate returns for their shareholders.
The report further notes that the larger capital base is likely to support long-term profitability, although the industry may face short-term challenges. A significant factor contributing to these challenges is the anticipated decline in foreign currency revaluation gains, which have boosted earnings in recent years. With a more stable exchange rate, these revaluation gains are expected to decrease, leading to a projected drop in the return on equity (ROE) to 22.8 percent in 2025.
“As the exchange rate stabilises, foreign currency revaluation gains, which accounted for around 50 percent of investment income in FY 2023 and FY 2024, will moderate,” the report explained. “Additionally, the anticipated disinflation in the consumer price index (CPI) will also reduce asset yields, leading to a decline in return on average investment.”
Despite these challenges, the report remains optimistic about the industry’s long-term outlook, citing factors such as the stricter enforcement of compulsory insurance policies, more efficient product distribution, and an expanded capital base as key drivers for sustainable profitability.
