By ifeoma Onyekachi

Nigeria’s insurance regulator, National Insurance Commission (NAICOM), has introduced a new financial safety mechanism aimed at protecting policyholders and reinforcing confidence in the industry, following persistent concerns over unpaid claims and insurer insolvency.

The initiative, known as the Insurance Policyholders’ Protection Fund (IPPF), compels all licensed insurance and reinsurance firms to make annual contributions equivalent to 0.25 per cent of their net premium income. The move is backed by provisions of the Nigeria Insurance Industry Recapitalisation Act 2025, which came into force on July 31, 2025.

Under the framework, companies are required to file annual assessment returns to NAICOM by March 31, detailing their gross written premiums and brokerage deductions used to determine net premium income. Regulators say strict enforcement measures are in place, with penalties for defaulting firms ranging from fines to possible suspension or withdrawal of operating licences.

The Fund is structured to act as a financial buffer in the event of insurer distress or collapse. It will be deployed to settle verified claims that remain unpaid due to insolvency or regulatory shutdown of an insurance provider. This aligns Nigeria’s insurance architecture with global best practices, where policyholder protection schemes are used to mitigate systemic risks and shield consumers.

In addition to contributions from operators, NAICOM will inject 0.25 per cent of the balance from the Security and Insurance Development Fund (SIDF) annually. The Commission also retains the authority to provide supplementary funding as loans when necessary, with provisions to recover such advances from future contributions.

Industry analysts note that the introduction of the IPPF comes at a critical time, as regulators push reforms to deepen insurance penetration and restore public trust. Nigeria’s insurance sector has historically struggled with low uptake, often attributed to weak claims settlement records and limited consumer confidence.

NAICOM, in its implementation guidelines, emphasised that the Fund will be governed by strict transparency and accountability standards, including clear procedures for fund management, disbursement, and recovery. The Commission added that the scheme is designed not only to protect policyholders but also to enhance the overall stability and credibility of the insurance market.

The regulator expressed optimism that the policy will strengthen risk management across the sector and provide a safety net that reassures both individual and corporate policyholders of compensation, even in worst-case scenarios involving insurer failure.