Senate to Impose N50m Fine on Unlicensed Insurance Firms
The Senate has proposed a fine of N50m to the principal officers of insurance companies operating without valid licenses or that they be sentenced to a two-year prison term or both.
It proposed this in a bill sponsored by Senator Tokunbo Abiru (APC, Lagos East) and 40 others titled, ‘Nigeria Insurance Industry Reform Bill, 2024,’ which seeks an Act to repeal the Insurance Act, Cap117 2004, the Marine Insurance Act, Cap M3 Laws of the Federation of Nigeria 2004, the Nigeria Reinsurance Corporation Act, Cap, N131, Laws of the Federation of Nigeria, etc.
The bill which passed its second reading in July also proposed that any individual found engaging in unlicensed insurance activities will face a fine of N25,000,000 or imprisonment for up to two years, or both.
The bill states, “A person who transacts any insurance business without being licensed for that purpose under this bill commits an offence and is liable on conviction, in the case of an individual, to a fine of N25,000,000 or to imprisonment for two years or both.
“(b) a company, firm or other combination of persons, each principal officer of the company, firm or other combination of persons responsible to a fine of N50,000,000 or imprisonment for a term of two years; or to both.”
In addition to these punitive measures, the bill outlines stringent capital requirements that must be met by any entity wishing to operate in the insurance market.
Non-life insurance businesses must maintain a minimum capital of N25bn or a risk-based capital as the commission determines.
The Senate also set the minimum capital for life assurance businesses at N15bn, while reinsurance businesses are required to maintain a capital of N45bn.
These requirements, according to the sponsor, are designed to ensure that insurers possess the financial resilience necessary to meet their obligations.
The bill also mandates that any insurer intending to commence operations in Nigeria must deposit 50 per cent of the required minimum capital with the Central Bank of Nigeria.
It added that upon registration, 80 per cent of this deposit will be returned with interest within 60 days. Existing companies are required to deposit 10 per cent of the minimum capital with the CBN, with interest applied annually at the minimum lending rate.
To further protect consumers, the bill specifies that insurance policy documents must be delivered to the insured within five working days after the payment of premiums, or within 30 working days for special and industrial risk insurance.
Failure to comply with this provision will result in a fine of up to five per cent of the premium received, along with additional penalties as determined by the commission.
Insurers are also prohibited from denying claims based on policy terms or conditions if it is proven that the policy document was not delivered before the loss occurred, except in specific circumstances.
Moreover, the bill noted that the introduction of new insurance products will require prior approval from the commission, which must respond within 30 days of receiving an application.
If the commission fails to communicate its decision within this timeframe, the product will be deemed approved.
Insurers who introduce new products without the necessary approval will face daily fines of N5m for each day the violation continues.
The bill states that “A person shall not carry on insurance business in Nigeria unless the insurer has and maintains, while carrying on that business, a minimum capital in the case of non-life insurance business, the higher of N25,000,000,000.00, or risk-based capital determined from time to time by the commission.
“in the case of life assurance business, the higher of — N15,000,000,000, or risk-based capital determined from time to time by the commission.”
It further adds that “in the case of reinsurance business, the higher of N45,000,000,000, and risk-based capital determined from time to time by the commission.”
