The Nigerian insurance industry has reported a significant N2.3 trillion in premiums, with N882 billion paid out in claims. However, the sector faces scrutiny regarding its low contribution to the Gross Domestic Product (GDP) and its reliance on international reinsurers.
One perspective suggests that the National Insurance Commission (NAICOM) is adopting a reactive approach, mirroring the Central Bank of Nigeria's (CBN) capitalisation policies. This strategy, critics argue, leads to an artificial inflation of capital rather than organic growth through effective risk management.
A former Chairman of an insurance firm highlighted that approximately 95% of premiums are channelled abroad to international reinsurers, indicating a limited capacity within the domestic market to handle substantial risks. This outflow of funds represents a drain on the nation's scarce foreign exchange.
The industry's premium generation stands at a mere 0.5% of GDP, falling far short of the international benchmark of 5% and South Africa's approximately 6%. Concerns have been raised about NAICOM's leadership, with some suggesting that regulators are 'failed players' who stifle innovation and focus on administrative measures like capital increases over substantive risk-taking.
In a related development, Sovereign Trust Insurance Plc (SOVRENINS) announced the successful remittance of a N1.5 billion statutory capital deposit to the CBN. This action complies with directives under the Nigerian Insurance Industry Reform Act (NIIRA) 2025, requiring insurance operators to lodge 10% of their regulatory minimum capital with the CBN.
The Deputy General Manager and Head of Corporate Communications and Investor Relations at Sovereign Trust Insurance, Mr. Olusegun Bankole, stated that the deposit is a milestone in the company's growth and recapitalisation journey. Dr. Lucas Durojaiye, the Managing Director and CEO, emphasized the company's commitment to regulatory compliance and financial solvency.
Sovereign Trust Insurance is also undertaking a rights issue to raise approximately N5 billion, offering 2.51 billion ordinary shares at N2.00 each. This initiative aims to bolster its capital base and support its growth ambitions amidst evolving regulatory requirements.
Despite a reported profit before tax of N1.02 billion for the financial year ended December 31, 2025, Sovereign Trust Insurance saw its earnings decline from N2.64 billion in 2024 due to rising operating costs. While insurance revenue increased to N44.6 billion from N40.4 billion, higher insurance service and reinsurance costs impacted profitability.
