Nigerian Insurance Sector Poised for Transformation With N600bn Capital Injection as Reform Bill Nears Passage – Agusto & Co

The Nigerian insurance sector is expected to undergo a transformative phase, insurers planned to inject around 600 billion Nairas in fresh capital to meet the changing regulatory requirements.

This is in accordance with the report of the 2025 Nigerian insurance industry, published by Agusto & Co., which predicts that the imminent Nigeria insurance reform bill will accelerate the sector’s transition to a risk -based capital framework, ultimately strengthening the subscription capacity and financial resilience.

The increased capital increase is drawn by the planned overhaul of the regulatory framework for industry, which should introduce higher minimum capital requirements in various business segments. The reform, which has been underway for more than a decade, should now be signed before the end of 2025, forcing insurance firms to strengthen their financial database in accordance with new capital thresholds.

The transition to capitalization of capital and industry based on risks

The Nigeria insurance reform bill should inaugurate a more structured approach to capital adequacy, the insurers necessary for capital maintenance in accordance with the specific risks they subscribe. The bill will replace the structure of existing stable capital needs, which has long been criticized for having failed to take into account the differences in the exposure to the risks of insurers. THE The framework should reduce systemic vulnerabilities and improve industry’s ability to absorb shocksaligning capital requirements with risk levels.

AGUSTO & CO. believes that the transition will require a capital injection of 600 billion nairas into the industry, while insurers rush to respond to new capital references. Although the recapitalization process is progressive over time, an increase in capital mobilization activities is expected in 2025, companies seeking to position themselves for compliance before regulatory deadlines.

In his report, Agusto & Co. said: “The Nigerian insurance reform bill, which seeks to revise the regulatory framework for industry, should be adopted before December 31, 2025. We believe that the bill would oblige the National Insurance Commission (Naicom) to accelerate the transition to a risk regime based on risks (launched more than a decade).

“This legislation would have a significant impact on the capitalization of industry, given the planned increase in minimum capital requirements between business segments. We plan a capital injection of 600 billion Nairas as insurers comply with new thresholds, leading to increased subscription capacity and greater risk retention. ”

The report also stressed that the transition to risks based on risks reshaping subscription practices, encouraging insurers to adopt more robust risk assessment strategies to optimize profitability. This should stimulate innovation, especially in the adoption of Technology solutions aimed to improve penetration and efficiency.

Short -term challenges in the middle of lower fx gains

While a larger capital basis should improve long -term profitability, industry is likely to Facing short -term challenges, especially as gains in revaluation of foreign currencies – which have considerably increased profits in recent years – should decrease.

Over the past two years, insurance companies have benefited from the damping of Naira, which has inflated the value of the dollar assets, leading to substantial FX re -evaluation gains. During the year 2023 and the year 2024, these gains represented around 50% of the total investment income, considerably strengthening the results of the insurers.

However, with the Nairas who should stabilize after the recent exchange market reforms, these gains will probably decrease. This could lead to a lower equity (ROE) equity (ROE) for insurers, AGUSTO & CO. projecting a drop to 22.8% in 2025, compared to previous years.

The report noted: “We expect the widening portfolio, with the potential to support profitability, stimulates the more efficient management of the investment portfolio. However, the expected stability of the exchange rate would moderate the gains in the revaluation of foreign currencies, which inflated investment income and would represent 50% of the profits in progress 2023 and FY 2024.

“The expected decrease in asset yield – because the rebellious consumer price index (IPC) reflects disinflation – would also have a moderate investment income. Thus, we plan a drop of 957 basins in the return on average investment, because the impact of moderate investment income is amplified by the enlarged portfolio. ”

Profitability prospects and industry adjustments

With the drop in the gains in the revaluation of the FX, the profitability of the industry should weaken short -term. AGUSTO & CO. provides that the return on average equity tax (ROE) will fall to 22.8% in 2025, marking a retirement from recent liners.

However, the report argues that the sustainable growth in profits, in particular the volatile gains of the FX – will probably maintain an upward trajectory. This will be supported by:

1. Stricter application of compulsory insurance policies, which could extend the higher income.
2. Distribution of more efficient products, taking advantage of digital channels to improve penetration.
3. An extended capital base, allowed Insurers to maintain more risks and reduce dependence on reinsurance.

While companies adapt to the new regulatory environment, the profitability mixture in the insurance sector should change, investment income playing a less dominant rolewhile The subscription benefits become more central for profits.