President Bola Ahmed Tinubu recently signed into law the Nigerian Insurance Industry Reform Act (NIIRA) 2025, a reform that is set to reshape the country’s insurance sector. By introducing stricter capital requirements, Risk-Based Capital (RBC) frameworks, compulsory insurance expansion, and consumer protection measures, the Act raises expectations for stronger, more resilient operators.

With these changes, insurance company ratings are expected to serve as a crucial reference point in evaluating financial strength and long-term sustainability. A rating helps answer a simple but important question: how well-positioned is an insurer to meet its obligations and compete effectively in this new era?

Here are some key considerations that shape insurance company ratings:

1. Operating Environment

An insurer’s strength is closely linked to the economic and regulatory context in which it operates. The NIIRA 2025 has significantly changed this context by consolidating outdated laws and mandating Risk-Based Capital. Companies will be assessed on their ability to adjust to these new standards while also navigating macroeconomic and competitive pressures.

2. Business Profile

The depth and quality of an insurer’s business model are central to its rating. Important factors include:

• Market Share & Branding – Larger firms often benefit from efficiency and recognition, but smaller players can still compete effectively through niche focus or strong customer loyalty.
• Diversification – A spread across different products, geographies, and policyholders lowers concentration risks.
• Revenue Stability – Recurring premiums and renewals are seen as more reliable than one-off or project-based income streams.

With the Act expanding compulsory insurance—covering areas such as group life assurance, public buildings, and government assets, insurers with strong distribution and compliance strategies will be better positioned to achieve sustainable revenue growth.

3. Capital Adequacy

Capital is the financial backbone of an insurer. The Act has raised requirements substantially:

• Non-life insurance: N25bn or RBC
• Life insurance: N15bn or RBC
• Reinsurance: N45bn or RBC

Ratings will consider not just the amount of capital but also its quality and flexibility. Well-capitalised companies are more resilient to shocks, while those with limited or less reliable capital bases face greater challenges. The 12-month compliance window may also drive industry consolidation as some firms seek mergers or acquisitions to meet the new thresholds.

4. Earnings & Profitability

Sustainable profitability is a key marker of financial strength. Diversified product offerings, disciplined underwriting, and efficient claims management all contribute to consistent earnings.

Importantly, the NIIRA’s emphasis on timely claims settlement will bring greater focus to underwriting discipline and customer service, both of which influence earnings quality.

5. Operational Risk & Governance

Strong governance and reliable systems are vital to reducing operational risk. As the sector embraces digitisation and Insurtech, companies must balance the benefits of efficiency and reach with the risks of system failures or cyber threats. 

6. Regulatory Compliance & Market Standing

With NAICOM granted broader supervisory powers, regulatory compliance has become a more prominent part of market standing. Insurers that demonstrate transparency, timely reporting, and adherence to new rules will be better placed to achieve stronger ratings and market credibility.

The NIIRA 2025 sets a higher standard for Nigeria’s insurance industry, aiming to improve resilience, boost market participation, and strengthen consumer confidence. Ultimately, those companies that combine robust capitalisation, sustainable business models, prudent risk management, and strong governance will stand out as credible and trustworthy players in this new era of insurance.