The National Insurance Commission (NAICOM) has introduced a new industry-wide funding mechanism aimed at strengthening policyholder protection and reinforcing financial stability within Nigeria’s insurance sector.
Under the directive, all insurance and reinsurance companies are required to contribute 0.25 percent of their net premium income annually to the newly established Insurance Policyholders’ Protection Fund (IPPF). The Commission warned that failure to comply within the stipulated timeframe could attract regulatory sanctions, including the suspension or outright cancellation of operating licences.
The IPPF is designed as a safety net to address cases of financial distress and insolvency among licensed insurers and reinsurers. It will also serve as a funding pool for the settlement of valid claims that remain unpaid due to the failure or licence withdrawal of an insurance operator.
Details of the framework were outlined in a circular titled “Guidelines for the Collection, Management, and Administration of the Insurance Policyholders’ Protection Fund.” According to NAICOM, contributions to the Fund took effect from July 31, 2025, the date the Nigeria Insurance Industry Recapitalisation Act (NIIRA) 2025 was signed into law.
The Commission clarified that net premium income, which forms the basis for the 0.25 percent contribution, is defined as gross written premium less brokerage commission. Insurers and reinsurers are also required to file an IPPF Assessment Return on or before March 31 each year, detailing their gross written premiums and brokerage commissions for the relevant assessment period.
In addition to industry contributions, NAICOM stated that it will commit 0.25 percent of the balance in the Security and Insurance Development Fund (SIDF) as of December 31 of the preceding year to the IPPF. The Commission further noted that it may inject additional funds in the form of loans where necessary to support the objectives of the scheme, with such advances to be recovered from future SIDF contributions.
The guidelines emphasise that the Fund will be strictly utilised for resolving insolvency cases and settling claims that have been admitted but remain unpaid due to the financial failure or regulatory exit of an insurer or reinsurer.
NAICOM noted that the broader objective of the initiative is to deepen confidence in the insurance industry by ensuring that policyholders and beneficiaries are protected even in the event of institutional failure. It also seeks to promote timely and accurate remittance of contributions, establish sound governance and investment practices, and create a transparent framework for the disbursement and recovery of funds.
The introduction of the IPPF marks a significant regulatory step as the Commission intensifies efforts to build resilience within the insurance market, while addressing long-standing concerns around claims settlement and consumer trust.
