NAICOM wields the big stick, unveils policyholders’ safety fund rules
By Omobola Tolu-Kusimo The National Insurance Commission (NAICOM) has raised regulatory pressure on insurance operators with guidelines to operationalise the Insurance Policyholders’ Protection Fund (IPPF), warning that defaulters risk losing
By Omobola Tolu-Kusimo
The National Insurance Commission (NAICOM) has raised regulatory pressure on insurance operators with guidelines to operationalise the Insurance Policyholders’ Protection Fund (IPPF), warning that defaulters risk losing their operating licences.
This was revealed in a guideline released yesterday and titled: “Guidelines for the Collection, Management, and Administration of the Insurance Policyholders’ Protection Fund.
The new rules going by the guideline, issued pursuant to the Nigerian Insurance Industry Reform Act (NIIRA) 2025, compel all insurers and reinsurers to contribute 0.25 per cent of their net premium income annually into the fund, now positioned as a financial lifeline for policyholders in the event of insurer collapse.
In a decisive shift towards stricter enforcement, the commission said failure to remit contributions within stipulated timelines would constitute grounds for suspension or cancellation of licence, underscoring a zero-tolerance stance on non-compliance.
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The IPPF is designed to protect policyholders whose claims remain unpaid due to insolvency or licence revocation of an insurer. Under the framework, funds will be deployed to settle verified claims, effectively reducing the risk borne by customers in a historically fragile segment of the financial services sector.
The guideline further showed that NAICOM will also commit 0.25 per cent of the balance in the Security and Insurance Development Fund, with provisions to inject additional liquidity as loans where necessary to stabilise the system.
Operators are now required to file their assessment returns by March 31 each year, detailing gross premiums and brokerage deductions, while actual contributions must be paid on or before June 30.
Where discrepancies arise between management and audited accounts, any outstanding balance must be settled within 10 working days—further tightening compliance expectations.
Industry watchers say the timelines reflect the regulator’s intent to close loopholes that previously enabled delayed remittances.
To safeguard the Fund, NAICOM has mandated independent management by a Securities and Exchange Commission-registered fund manager with a minimum capital base of N5 billion.
Investments are restricted to low-risk, government-backed instruments, with an emphasis on liquidity, capital preservation, and asset-liability matching.
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The Fund Manager will submit quarterly performance reports, annual audited accounts, and stress test results, reinforcing transparency in the system.
Similarly, access to the Fund will not come as a bailout but as structured loans to distressed insurers, subject to rigorous conditions, including actuarial valuation, claims verification, and regulatory approval.
Repayment will be tied to the Monetary Policy Rate, with a maximum tenor of 24 months or earlier upon recovery. Beneficiaries—policyholders—must be paid within 10 working days of disbursement.
NAICOM stressed that funds must be used strictly for claims settlement, warning against diversion.
The guidelines also introduce whistleblower protection, compelling insurance institutions to safeguard individuals who report imprudent practices, while the Commission retains powers to investigate and sanction erring firms.
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A governing committee comprising regulators and industry representatives will oversee the Fund, with clear rules on conflict of interest, disclosures, and conduct.
Beyond licence withdrawal, NAICOM said it may publish names of non-compliant operators, in a move analysts say could heighten reputational risks for erring firms.
The Commission added that penalties would be guided by disgorgement principles, ensuring companies do not benefit from regulatory breaches.
The guidelines signal a new era of regulatory assertiveness in the insurance sector, coming amid broader reforms aimed at strengthening capital base and restoring public confidence.
For operators, they are to comply, recapitalise, and pay up or risk being shut out.
