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The Nigerian Insurance Act 2003 is the principal Insurance Law in Nigeria and it regulates insurance business in Nigeria. Section 1 of the Act makes provision for its application. The Act applies to all insurance businesses and insurers, other than insurance business carried by insurers of the following description.

  1. A friendly society. That is, an association of persons established for the purposes of aiding its members or their dependents. And where such association does not employ any person whose main occupation; a. Is the canvassing of other persons to become member of the association; b. Is the collecting of contribution or subscriptions towards the funds of the association from its members; or
  2. A company or any other body (whether corporate or not) or persons whose business is established outside Nigeria engaged solely in reinsurance transactions with an insurer. And who are authorized by provisions of this Act to carry on any class of insurance business, but not otherwise. 

From the above, it is understandable that the exclusion of friendly association is for the purpose of incorporating the already existing traditional mode of insurance in practice in many parts of the country. That is, where group of people or friends usually come together to contribute funds on the basis which they agree. And the funds thereof are then hand over to members in turn in period of financial distress.

Section 2 of the Act made provision for class of action of insurance business for the purpose of registration. And it stated that for the purpose of the Act. There shall be two main classes of insurance that is:

  1. Life insurance business; and
  2. General insurance business

Consequently, the Act went further to categorize life insurance business into three to include

  1. Individual life insurance business
  2. Group life insurance or pension business and
  3. Health insurance business

Similarly, general insurance business was sub-classified into eight to include;  (a) life insurance business.  (B. general accident  (c) motor vehicle insurance business  (d) marine and aviation insurance business  (e) oil and gas insurance business  (f) engineering insurance business  (g) bonds credit guarantee and courtship insurance business  and miscellaneous insurance business


The provisions of Nigerian Insurance Act, 2003 CAP, L17, LFN, 2004 governs the regulation of insurance practice in Nigeria. Thus, by the provision of Section 3(a) of the insurance law in Nigeria, no person shall commence or carry on any class of insurance business as provided in section 2 of the Act except;

  1. A company duly incorporated as a Limited Liability Company under the Companies and Allied Matters Act, 1990. And (currently Companies and Allied Matter Act ,2020) by virtue of amendment of the old Act) or
  2. Body duly established by or pursuant to any other enactment to transact the business of insurance or reinsurance.

By the express provision of section 46 of Act. And subject to other provisions, no insurer shall commence insurance business in Nigeria unless he is registered with the Commission. Furthermore by the provision of section 102; “The commission means the National Insurance Commission constituted under Act 1 of 1997”.

By the  dictates of section 4 (2), the  Commission shall not  grant approval if it is of an opinion that it is not in the public interest. Or in the interest of the Policyholders or persons who may become Policy holders to grant it.

Conversely, Section 4 (3) gives the Insurer right to appeal the decision of the Commission to the Minister of Finance. This shall be within thirty days of the refusal of the Commission to grant approval. And the minister shall have sixty (60) days from the day of receipt of appeal to give his decision. See Section 4 (4) of the Act.

By section (5), an application for registration as an Insurer shall be made to the Commission in the preserved form. And be accompanied by a business plan and such other documents or information as the commission may, from time to time direct or require.

Moreover, life insurance and general insurance business shall be subject to separate Application and registration.

Similarly, Section 6 of the Act vests the power of registering insurer on the commission (the National Insurance Commission). And further enumerates the conditions that must to be consideration before the Commission can register a proposed insurer. Section 7, provides that where the Commission is of opinion not to register, it shall reject the application in writing to the Applicant. This shall be within 60 days of the submission of the application of the commission’s intention to reject the application”.

 And by Section 7 (2), any applicant aggrieved by the intention of the Commission to reject an application for registration as an insurer may within thirty [30] days after the notice of the Commission’s intention to reject application appeal to the minister of finance.


An applicant shall maintain certain paid up share capital before carrying on insurance business in Nigeria. And which he shall deposit with the Central Bank of Nigeria. See Section 9 & 10 of the Act. By Section 10 (1) of the Act “An insurer intending to commence insurance business in Nigeria shall deposit the equivalent of fifty per cent of the paid up share capital referred to in section 9 of the Act known as “statutory deposit” with central bank. And failure to make the statutory deposit shall constitute a ground for cancellation of certificate of registration. Consequently, once the requirement for registration is met, the application for registration shall be forwarded to the director in the prescribed manner. And annexed with all other particulars which the Director may require.

Finally, by section 6 (2) of the Act, the Commission shall if satisfied, register the applicant as an insurer. And issue the applicant a Certificate of Registration. And after registration, the notice of the registration of an applicant as an insurer shall be published in the Gazette or in such other manner.

Requirements for Registration

The requirements for registration under section 6 (1) of the Act to are as follows:

  1. The class or category of insurance business shall be conducted in accordance with sound insurance principles;
  2. The applicant being one of the person referred to under section 3 of the Act is duly established under the applicable law. And has a paid up share capital. And statutory deposit as specified in section 9  of this Act for the relevant class of insurance business.
  3. The arrangement relating to reinsurance treaties in respect of class or category of insurance business to be transacted are adequate. And valid.
  4. The proposal forms, terms and conditions of policies are in order and acceptable;
  5. There shall be competent and professionally qualified persons as may be determined from time to time by the  commission to manage the company;
  6. The applicant does not have in its employment a person who do not disqualify for appointment by an insurer under section 12 of this Act.
  7. The Directors have attended the Promoters interview. And are persons who have not been involved in or been found guilty of fraud.
  8. The name of the applicant is not likely to be mistaken for the name of any other insurer who is or has been an insurer or so nearly resembling that name, as to be capable to deceive.
  9. The applicant has paid the fee prescribed for registration.
  10. It is in the interest of public policy to register the applicant.
  11. Where the class of insurance is other than life insurance business, the applicant is for the purpose of transacting not less than three class of insurance business
  12. The applicant has a satisfactory business plan. And feasibility study of the insurance business to be transacted within the next succeeding five years from the date of the application; and
  13. In the case of reinsurance business, that in addition to matter referred to in this section, it has complied with section 9(1)(d) of this Act and any other condition which may be specified from time to time by the Commission.

Consequent upon the above condition, and if the director is not satisfied, with any of the matters stated above, he shall give a notice in writing of his intention to reject the application. Thus, an aggrieved applicant is required to lodge a notice of appeal with the Minister of Finance stating the grounds of such appeal within sixty (60) days of the director’s refusal.


The Insurance Act which is the principal insurance law in Nigeria has explicit provisions governing the carriage of insurance business in Nigeria after registration. Some of such post-registration requirements are below

  • Appointment of Chief Executive subject to the approval of the Commission
  • Account and audits
  • Returns
  • Reserves
  • Investment
  • Amalgamation and transfers
  • Winding up

Appointment Of Chief Executive: Section 13(1) Of The NIGERIAN INSURANCE Act 2003

No insurer shall appoint a person as a Chief Executive whether designated as the Managing Director, Executive Chairman or otherwise if the appointment contravenes the provision of Section 12 of the Act unless

  • The Insurer has served the Commission a written Notice that it proposes to appoint that person to the position and containing such particulars as may from time to time he prescribed by the Commission and
  • Such an appointment is approved by the Commission.

The Director has a period of thirty (30) days to consent to the proposed appointment. See section 3 (a) of the Act. The Notice on the Commission by the Insurer shall contain a statement with signatures of person for appointment. And shall state that it is with their knowledge and consent. Consequently, if an Insurer carries on business without complying with the requirement of Section 13 of the Act, himself and the purported Chief Executive commits an offence. And liable on conviction to a fine of N1, 000 for everyday he so carries on business in default. This particular provision is to ensure that those who manage insurance companies in the country are people of sound morals and reputation.


By the provision of section 26 of the Act, an insurer shall not later than 30 of June each year submit to the Commission;

  • A balance sheet duly audited showing the financial position of the insurance business of the Insurer. And its subsidiaries at a close of that financial year. As well as with a copy of the relevant profit and loss account. Which the Insurer is to present to its shareholders at its annual general meeting.
  • A revenue account applicable to each class of insurance business for which the Insurer is to keep a separate account of receipt and payment; and
  • A statement of investments representing the insurance funds

Consequently, no insurer shall distribute any dividends until the commission has approved the annual returns of the Insurer. This approval is within 30 days of its submission to the Commission.

            In a similar view, an Insurer in life insurance business shall submit additional document to the commission every three years. These documents includes an abstract of the report of an actuary and a valuation report of its insurance business; a summary and valuation of the life policies; a table showing premium, policy reserve values and guaranteed surrender values; and a certificate of solvency signed by an actuary stating that the value of the assets representing the funds maintained by the Insurer in respect of the life insurance business exceeds the value of the liabilities. See Section 27 of the Act. Consequently, Failure to comply with the provision of section 27 (supra) is an offence. And liable on conviction to a fine of N5, 000 per everyday of default.

The purpose of this annual examination of the financial state of the Insurance Companies is to enable the Commission unravel the problems of these companies timely before serious damage happens to the interests of the Policy Holders.

AUDITS – Section 28 of the Nigerian Insurance Act 2003

The Balance Sheet, Profit and Loss Account and Revenue of Insurance Company in respect of their insurance business shall be a subject of audit annually by an external Auditor. And at the conclusion of such audit the auditor shall issue a certificate signed by him stating whether in his opinion, the insurer has adequately kept its books and records and that the documents give a time and far view of the financial position of the insurance company. See Section 28 (2) (a – e)

An Insurer transacting life insurance businesses is shall by the provision of Section 29 of the Act submit additional documents to the Director. And this is to happen once in every three years. These reports are: (a) a valuation of the assets and liabilities of the insurer. And (b) a determination of any excess over those liabilities of the assets representing the funds maintained by the Insurer.

The purpose of this annual examination of the financial condition of these insurance companies is to detect its problems early enough so that regulatory or punitive measures will be of option before serious damage happens to the Policyholders and claimants.

Amalgamation and Transfer.

The provision and procedure for amalgamation and or transfer is provided in Section 30 of the Act. And accordingly, no insurer shall amalgamate with, transfer to or acquire from any other Insurer any insurance business or part thereof, without the approval of the commission. And/or without the sanction of the court, (i) amalgamate with any other Insurer carrying on life insurance business;. Or (ii) transfer to or acquire from any other Insurer, any such insurance business or part thereof.

Meanwhile, where the commission consider granting an approval pursuant to Section 30 (ia), it may call for such statements, documents as other information as shall enable it to reach a decision on the matter.

However, where the amalgamation is in respect of a class of insurance business in subsection (Ib) of Section 30 with another insurance business or where an insurer intends to or the transferring or acquisition of class of insurance business is in question, in whole or in part, the Insurer affected shall apply to the court to sanction the amalgamation or transfer as the case may be

However, before any such application goes to the commission for approval or to the Court to sanction any transaction under this section; the notice of intention to make the application, together with a statement of the nature of the amalgamation, transfer or acquisition shall, at least three months before the application , be publish’d in at least five (5) National Newspapers. And notice of it on the commission within the three months. Certified True Copies of each of the following documents shall be open for inspection by the members and Policyholders at the principal and branch offices of the Insurers concerned and these documents are.

  • A draft of the agreement or deed with proposal to effect the   amalgamation, acquisition or transfer
  • Auditor’s report in respect of the insurance business of each of the Insurer concerned, prepared in the prescribed form;
  • Actuarial reports in respect of life insurance business of each of the insurer concerned, prepared in the prescribed from; and
  • A report on the proposed amalgamation, transfer or acquisition prepared by an independent Actuary. See Section 30 (4,5,6,7,8,9,10,11) of the Act.

Separation of Accounts and Reserve Funds

By Section 19 of the Act, where an Insurer carries on two classes of insurance business, all the receipts of each of those classes of insurance business shall be and from a separate insurance fund with the appropriate name, so that in case of life insurance, there shall be;

  • The individual life insurance business fund
  • The group life insurance business and pension fund
  • Health insurance business

And by the provision of subsection 2, each insurance fund shall represent the liabilities in respect of all contracts of insurance of that particular class and shall consist of;

  • In the case of life insurance business, the life insurance funds shall be a sum not less than the mathematical reserve; and
  • In the case of general insurance business, make provision for unexpected risk and provisions for outstanding claims. These include in the case of the later, provision estimated to provide for the expenses of adjustment or settlement of such claims.

By the Provision of Section 20 of the Act, an insurer shall in respect of its general business, establish and maintain provision for uncertain risks. And which shall be on a time apportionment basis of the risks underwriting in the year. There will also be a provision for outstanding claims. And which shall be in credit with an amount equal to the total estimation amount of all outstanding claims. And with a further amount representing ten (10) percent of the estimated figure for outstanding claims. Which shall be in respect of claims incurred but not reported at the end of the year under review. And provision for outstanding claims.

Investments Under the Nigerian Insurance Act 2003

Under Section 25 of the Act, an Insurer shall at all times in respect of an insurance business transacted in Nigeria invest and hold invested in Nigeria assets equivalent to not less than the amount of the funds in its class of business as shown in its accounts and balance sheets.

Similarly, the investment which an insurer may make is in subsection 2 to include;

  • Shares of limited liability companies;
  • Shares in other securities of a cooperative societies registered under a law relating to co-operative societies;
  • Loans to building societies approved by the commissions;
  • Loans on real property, machinery and plat in Nigeria;
  • Loans on life policies within their surrender values;
  • Cash deposit in or bill of exchange accepted by licensed bank; and
  • Such investment as maybe prescribed by the commission.

Consequently, no insurer shall in general insurance business invest more than 25 percent of its assets in real property. Or in contract of its life insurance business, invest more than thirty five (35) percent of its assets in real property. And an insurer who contravenes the above provision commits an offence. And liable on connection to a fine of N50, 000.

The provision for investment in the Act is to ensure the financial stability of insurers by stipulating likely safe and prudent area of investment like government securities and real property.

Secondly, it serves to prevent capital out flow from the domestic economy in view of the early domination of the market by foreign owned companies.


The procedure and provision for winding up is as provided in Section 32 of the Nigerian Insurance Act 2003. And it states that a petition for winding up of an insurance company may lie to the Court either;

  • Subject to the approval of the commission by not less than fifty policy holders, each of whom holds a policy that has been in force for not less than three years
  • By the commission on any of the following grounds
  • That there is cancellation of the registration of the insure in accordance with section 8(2) of the Act;
  • That the Insurance Company cannot be in review despite the intervention of the commission.

It is noteworthy the provisions of the Companies and Allied Matters Act shall apply to all winding up process. And as if the petition is pursuant to the Act.

However, in all cases, the Commission shall monitor all winding up process.

On the converse, and by the provision of Section 33 of the Act, and notwithstanding the provision of the Companies and Allied Matters Act, or any other enactment, no Insurer which transacts life insurance business shall voluntarily wind up its business, except for the purpose of effecting an amalgamation, transfer or acquisition under the Act.


Section 34 of the Act provides for the regulation of insurance agents/intermediaries. This provision envisages their registration/licensing as the prerequisites for transacting business as an insurance Agent unless;

  • Processes a Certificate of proficiency issued in the name  of the individual Applicant by the Chattered Insurance Institute of Nigeria;
  • Is duly appointed by an Insurer. And licensed in that behalf under the Act.

An application for a license as an insurance agent shall lie to the commission in the form applicable. And be accompanied by the prescribed fee and such other documents as maybe prescribed from time to time.

If the commission is of the opinion that the Applicant has satisfied the requirement of the Act, he shall license the Applicant as an Agent. However, it shall subject to this section be renewable every year on payment of the applicable fee.


Similarly, by Section 36 of the Act of the Nigerian Insurance Act, 2003, no person shall transact business in Nigeria as an insurance broker unless after due registration with the commission. And the commission reserves the right to grant or refuse such application.

Consequently, any person who transacts business as an insurance broker in Nigeria without registration commits an offence. And liable on conviction to a fine of N250, 000 or imprisonment for a term of 2 years or both in the case of firm or other combination of persons. And in addition, the Court may make an order requiring the refund of the sums collected by the individual or firm while so transacting the business to the rightful owners or to other persons entitled thereto. But in other cases, a fine of N250, 000.

An insurer who transacts business either knowingly or recklessly with an unregistered broker equally commits an offence. And liable on conviction to a fine of N500, 000. And the Court has powers to make such additional orders as to the refund of the sums.


The commission has powers by virtue of the provision of Section 37 of the Nigerian Insurance Act 2003 to cancel registration of an insurance broker if it is of the that the broker;

  • Has knowingly or recklessly contravened the provision of this Act relating thereto;
  • Practices as a loss Adjuster;
  • Has for the purpose of obtaining a license or paying a levy to the commission made a statement which is false in any material particulars;
  • Has been guilty from a Court of competent jurisdiction of fraudulent or dishonest practice including misappropriation of clients money; or
  • Has taken action contrary to the code of conduct of the profession.

An insurance broker shall at all times establish and maintain a client’s accounts. See section 40 of the Act. Thus all monies, premium, claims and recoveries from and for clients, insurer and re-insurer shall be in this account. And consequently, any insurance broker who contravenes the above provision shall be guilty of an offence. And liable on conviction to a fine of Two Hundred and Fifty Thousand Naira (N250, 000) or to imprisonment for a term of three years or to both such fine and imprisonment.

Where an insurance business transaction is through an insurance broker, he shall not later than thirty days of collecting the premium, pay same to the Insurer. And an insurance broker who contravenes this provision commits an offence. And liable on conviction to a fine of 10, 000 for first offender. N25, 000 for a second offender. And 250, 000 for third time offender – See Section 41 of the Act.


Loss adjusters registration shall be in accordance with the provision of Section 45 of the Act of the Nigerian Insurance Act, 2003. Thus, no person shall transact business as a loss adjuster in Nigeria unless after his registration. An application for registration is to the commission in an applicable form and payments of such fees. And with such documents as the commission may from time to time determine.  If the commission satisfied, it shall register the applicant as a Loss Adjuster.

A person who transacts business as a Loss Adjuster, without registration commits offence. And liable on conviction to a fine of N250,000. Similarly, an Insurer who recklessly transacts business with or engages the services of an unregistered loss adjuster commit on offence. And liable on conviction to a fine of 100,000.

The commission may cancel the registration of a Loss Adjuster if it is satisfied that he contravenes section 46.


The receipt of an insurance premium shall be a condition precedent to a valid contract of insurance. And there shall be no cover in respect of an insurance risk, unless there is payment of premium in advance. This is the provision of section 50 of the Act. And also an insurance premium collected by an insurance broker on behalf of an insurer shall be deemed to be premium paid to the insurer involved in the transaction. See section 50(2).

By the provision of section 51 of the Act, no insurer shall by itself or as a member of an Association of insurers, make a general increase in the minimum rate of premium chargeable with respect to any class of insurance business made compulsory by law except with a prior approval of the commission. Consequently, any person who contravenes this provision commits an offence. And liable on conviction to ten times the amount of premium charged and received by the insurer. Or N100, 000 whichever is higher.

Section 53 of the Act makes provision for limitation on the payment of insurance commission. And states further that no Insurer shall pay by way of commission to an Insurance Agents. Or Insurance Broker. And any other intermediary an amount exceeding twelve and half percent of the premium in respect of motor insurance business. And fifteen percent in respect of workmen compensation. Or twelve percent in respect of any other subdivision not being on above.  



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