Regulatory and Legal Framework of Insurance in Nigeria
This domain tests the statutory architecture - who may transact insurance in Nigeria, on what capital, and how NAICOM polices the market. Cite the instrument, not just the rule.
The framework
- NAICOM is the regulator, established by the National Insurance Commission Act 1997 and reinforced by the Insurance Act 2003, which consolidated licensing, capital, solvency and conduct rules.
- Licensing: insurers are licensed by class - life, general and reinsurance. Composite life-and-general operation is not permitted, so the two must sit in separate companies. Intermediaries (brokers, agents, loss adjusters) are separately licensed; brokers also register with the NCRIB.
- Capital and solvency: minimum paid-up capital is prescribed by class, with a solvency margin test on admissible assets. NAICOM has moved to risk-based capital, so legacy flat figures are examined as history only.
- Conduct and returns: statutory annual returns, audited accounts, actuarial valuation for life business, inspection powers, intervention and licence revocation.
- Professional bodies: CIIN (chartered institute, professional examinations and code of conduct), NIA for insurers, NCRIB for brokers, ILAN for loss adjusters.
Contract law overlay
Offer, acceptance, consideration, capacity and legality still apply; insurance adds insurable interest, utmost good faith and the section 50(1) premium rule. Disputes go to the courts or arbitration, while NAICOM handles complaints against licensees.
Worked example
A broker collects ₦2m premium in March, remits to the insurer in August, and a fire occurs in July. The insurer is not liable: section 50(1) makes receipt of premium a condition precedent. The broker's failure to remit within the prescribed 30 days is a separate regulatory breach, and the broker - not the insurer - answers for the client's loss.
Traps
Saying the insurer must pay because the broker held the money. Treating NIA or NCRIB as regulators. Quoting capital figures without naming the class.