The National Assembly of Nigeria has proposed a penalty of N25 million for individuals found operating unlicensed insurance businesses in the country.
This provision is part of the proposed Nigeria Insurance Industry Reform Bill, 2024, which seeks to overhaul the existing insurance regulatory framework in Nigeria.
According to the proposed bill, any individual who engages in insurance business without the proper licensing will be liable to a fine of N25 million or face a prison term of two years, or both.
This proposed amount is a 100-fold increase from the N250,000 fine for a similar offence in the Nigeria Insurance Act 2003
For companies or firms found guilty of the same offense, the penalty doubles, with principal officers of the organization facing fines of N50 million each, alongside the possibility of a two-year prison sentence.
The bill document seen by TheWitness read: “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 —
“(a) an individual, to a fine of N25,000,000.00 or to imprisonment for a term of 2 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 N50,000,000.00 or to imprisonment for a term of 2 years; or to both.”
The bill further stipulates that any entity applying for a license must be incorporated as a limited liability company under the Companies and Allied Matters Act No. 3 of 2020, or established pursuant to any other law or enactment in Nigeria. This ensures that only legally recognized entities can operate in the insurance space.
Once licensed, insurers must conduct their business according to sound insurance principles. This includes prudent risk management, financial stability, and adherence to industry best practices. Failure to comply with these principles can result in the revocation of the insurer’s license.
The bill outlines several circumstances under which the Commission may cancel an insurer’s license. These include insolvency, failure to maintain required capital, cessation of business activities, and involvement in fraudulent practices. If a license is cancelled, the insurer is prohibited from accepting new business, and the Commission may act as a receiver to manage the company’s affairs.
The Senate in July 2024 passed for a second reading the bill to reform the insurance sector in Nigeria through passage of bill to that effect for a second reading.
The bill sponsored by its Chairman, Committee on Banking, Insurance and Other Financial Institutions, Senator Adetokunbo Abiru (APC Lagos East), 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.
According to Abiru, the bill seeks to provide for a comprehensive Legal and Regulatory Framework for Insurance Business in Nigeria and Related Matters.