The policyholders protection fund has been unveiled by the National Insurance Commission, with a directive requiring all insurance and reinsurance companies in Nigeria to contribute to the scheme.
The initiative is designed to safeguard policyholders and strengthen stability within the insurance sector.
Under the new framework, insurers are mandated to remit 0.25 percent of their net premium income annually into the policyholders protection fund.
The Commission stated that non-compliance with the directive could attract sanctions, including suspension or cancellation of operating licences.
The fund, officially known as the Insurance Policyholders’ Protection Fund, is established to address distress situations within the industry.
It will be used to resolve insolvency cases involving licensed insurers and reinsurers, as well as to settle claims that remain unpaid due to such financial failures.
In a circular titled “Guidelines for the Collection, Management, and Administration of the Insurance Policyholders’ Protection Fund,” the Commission stated that contributions commenced following the enactment of the Nigerian Insurance Industry Reform Act, 2025, signed into law on July 31, 2025.
The circular clarified that net premium income, which forms the basis of contribution to the protection fund, is calculated as gross written premium minus brokerage commissions.
Insurance operators are required to submit annual assessment returns to the Commission, detailing their premium figures within stipulated timelines.
In addition to contributions from insurers, the Commission will also inject 0.25 percent of the balance from the Security and Insurance Development Fund into the scheme annually.
The regulator noted that it may provide additional funding as loans when necessary, with provisions for recovery from future contributions.
The objectives of the policyholders protection fund include ensuring protection for policyholders and beneficiaries, promoting transparency in fund management, and establishing procedures for disbursement and recovery.
The guidelines also emphasise sound investment practices and accountability in the administration of the fund.
Industry analysts note that the initiative represents a significant regulatory step aimed at boosting confidence in Nigeria’s insurance sector.
By providing a safety net for policyholders, the scheme is expected to address longstanding concerns about delayed or unpaid claims resulting from insurer insolvency.
The fund is also structured to function as a financial buffer, ensuring that policyholders are not left exposed when insurance companies face financial difficulties.
Disbursements from the fund are expected to prioritise the settlement of verified claims, thereby protecting beneficiaries and maintaining trust in the system.
The introduction of the policyholders protection fund is expected to enhance regulatory oversight and strengthen consumer protection within Nigeria’s insurance industry.
It may also improve compliance standards and encourage more responsible financial practices among operators.
The initiative aligns with broader reforms aimed at deepening the insurance market and increasing public confidence in financial institutions.
