Joy Agwunobi 

DataPro Nigeria Limited, a leading credit rating agency, has said that the recently enacted Nigerian Insurance Industry Reform Act (NIIRA) 2025 will reshape how insurance companies are assessed, with greater emphasis on the operating environment, the quality and value of capital, and the sustainability of their business models.

In its latest Rating Brief, DataPro explained that the sweeping reforms introduced under the NIIRA 2025—signed into law by President Bola Tinubu—mark one of the most far-reaching overhauls of Nigeria’s insurance landscape in recent decades. The Act introduces a raft of measures designed to strengthen financial soundness, enhance consumer protection, and modernise market operations.

Key provisions of the law include higher minimum capital requirements for insurance operators, the enforcement of compulsory insurance across multiple sectors, digitisation of insurance processes to expand access and efficiency, a strict “zero-tolerance” policy for delays in claims settlement, the creation of dedicated policyholder protection funds in cases of insolvency, and expanded regional participation through schemes such as the ECOWAS Brown Card System.

According to DataPro, these reforms have fundamentally altered the context in which insurance firms will now be rated. “An insurer’s strength is closely linked to the economic and regulatory environment in which it operates. The NIIRA 2025 has significantly changed this environment by consolidating outdated laws and mandating Risk-Based Capital,” the rating agency stated, adding that “Companies will be assessed not just on compliance, but also on their ability to adapt effectively to new standards while navigating macroeconomic and competitive pressures.”

Capital, business model, and market position

DataPro highlighted that capital adequacy will no longer be judged solely by the size of a company’s capital base, but also by the quality and flexibility of that capital. “Well-capitalised companies are more resilient to shocks, while those with limited or less reliable capital bases face greater challenges. The 12-month compliance window may also drive industry consolidation as firms consider mergers or acquisitions to meet the new thresholds,” it noted.

The agency also underscored that the depth and quality of a company’s business model remain central to determining its credit rating. Factors such as market share, branding, diversification, and revenue stability will increasingly influence how insurers are perceived. Larger firms may benefit from efficiency and brand recognition, while smaller operators could remain competitive through niche strategies and strong customer loyalty.

Revenue stability, DataPro added, will be best assured through recurring premium inflows and policy renewals, as opposed to reliance on one-off income streams. The expansion of compulsory insurance—including group life assurance, insurance of public buildings, and coverage of government assets—means that insurers with robust distribution networks and effective compliance mechanisms will be better positioned for sustainable revenue growth.

Profitability, governance, and risk management

Sustainable profitability, according to the firm, is another critical marker of financial strength. Companies with diversified product lines, disciplined underwriting, and efficient claims management are expected to record more consistent earnings. With NIIRA 2025 placing greater emphasis on timely settlement of claims, underwriting discipline and customer service are expected to weigh more heavily in the assessment of earnings quality.

On governance and operational resilience, the firm stressed that strong leadership structures and reliable systems will be vital in managing risk. As digitisation and Insurtech adoption deepen across the industry, companies will need to balance the gains of efficiency and expanded reach with emerging vulnerabilities, including potential system failures and cyber risks.

Regulatory oversight and market standing

Another major implication of the new law is the expanded supervisory powers granted to the National Insurance Commission (NAICOM). With enhanced oversight, regulatory compliance has become a more prominent factor in market standing and ratings. “Insurers that demonstrate transparency, timely reporting, and adherence to new rules will be better placed to achieve stronger ratings and market credibility,” DataPro said.

Outlook for the Industry

The credit rating firm added that NIIRA 2025 sets a new benchmark for Nigeria’s insurance sector by aiming to improve resilience, broaden participation, and rebuild consumer confidence. It emphasised that insurers which combine robust capitalisation, sustainable business models, prudent risk management, and strong governance will emerge as credible and trustworthy players in the reformed landscape.

“Ultimately, insurance company ratings will serve as a crucial reference point in evaluating financial strength and long-term sustainability,” DataPro stated, while also noting “The question every rating seeks to answer is simple but vital: how well-positioned is an insurer to meet its obligations and compete effectively in this new era?”