“Regulatory Non-Compliance, Financial Statement Gaps Are Bane Of Unrecapitalised Insurers”

Investigations have revealed that failure to submit audited financial statements for many years, absence of approved financial statements for many years and non-compliance with key recapitalisation requirements are part of the reasons why some insurance companies failed to scale the recapitalisation hurdle in the insurance industry.

The development followed the conclusion of the latest recapitalisation exercise under the Nigerian Insurance Industry Reform Act (NIIRA) 2025, which commenced in July 2025 and had a deadline of July 31, 2026.

After the expiration of the recapitalisation deadline, the National Insurance Commission (NAICOM) issued new operating licences to 43 insurance and reinsurance companies that met the requirements of the exercise. NAICOM later added seven more companies, bringing the number of firms cleared to operate in the new dispensation to 50.

According to the Commission, the additional seven companies had submitted their recapitalisation documents, alongside evidence of payment of the required fees, before the July 31 deadline. Their documents were reportedly before appointed auditors for review before the deadline, prompting NAICOM to grant the auditors an additional 14 days to complete verification.

However, companies that failed to satisfy the prescribed conditions were excluded from the list and face regulatory sanctions, including possible liquidation.

Based on information from sources familiar with the regulatory process, some of the excluded companies had outstanding regulatory compliance issues dating back several years.

Sources said some of the firms had accumulated arrears of non-compliance with statutory requirements, making it difficult for them to participate successfully in the latest recapitalisation exercise.

In the case of at least two of the companies, the regulatory issues were said to have been linked to the unsuccessful 2019 recapitalisation exercise.

One of the affected companies, according to findings, had not submitted audited financial statements since 2019. Consequently, it did not have the required 2024 approved audited financial statements at the time of the latest recapitalisation exercise.

The absence of current audited accounts, sources said, left the company’s financial position significantly outdated and made it difficult for both the regulator and appointed auditors to establish its actual financial condition.

The company was also said to have repeatedly failed to submit monthly recapitalisation progress reports within the stipulated timelines, in addition to other outstanding regulatory obligations.

Some of the affected companies are: NICON Insurance Limited, Nigeria Reinsurance Corporation, Universal Insurance Plc and African Alliance Insurance Plc.

In the case of Universal Insurance, sources said the company was in advanced discussions to merge with another insurance firm, but the situation reportedly changed shortly before the deadline when the prospective merger partner secured substantial investment from a foreign investor, leaving Universal Insurance stranded.

Concerning NICON Insurance, it was alleged that there were disagreements over compliance with the prescribed verification process.

In July 2026, NICON reportedly informed NAICOM that it had secured approximately ₦20 billion in fresh capital.

The Commission subsequently requested updated minimum capital requirement computations, details of the investor, payment of the prescribed capital verification fee and evidence that the recapitalisation funds had been transferred into the designated Central Bank of Nigeria (CBN) escrow account.

Sources said NICON did not fully comply with the requests, arguing instead that compliance with the statutory insurance deposit requirement was sufficient to satisfy the recapitalisation condition.

However, the recapitalisation guidelines issued by NAICOM in September 2025 reportedly distinguish between the statutory insurance deposit and the recapitalisation escrow account.

Under the guidelines, the two serve different regulatory purposes, while transfer of recapitalisation proceeds into the designated escrow account was a mandatory condition precedent to capital verification.

Having failed to satisfy those preconditions, NAICOM reportedly concluded that NICON had not met the requirements for commencement of statutory capital verification.

Consequently, none of the appointed Big Four audit firms conducted the required verification of NICON’s claimed capital injection, sources said.

Nigeria Re faces similar hurdle
The situation involving Nigeria Reinsurance Corporation was said to be similar.

In July 2026, Nigeria Re reportedly notified NAICOM of a ₦30 billion capital injection.

The Commission subsequently requested updated minimum capital requirement computations, evidence supporting the source of the capital, payment of the prescribed verification fee and evidence of transfer of the recapitalisation proceeds into the designated CBN escrow account.

Although the corporation reportedly submitted some of the requested documents, it allegedly failed to transfer the claimed ₦30 billion into the designated recapitalisation escrow account, a requirement under the guidelines before verification could commence.

As a result, the regulator reportedly determined that the preconditions for statutory capital verification had not been met.

No verification of the claimed capital injection was consequently conducted by any of the appointed Big Four audit firms, leaving NAICOM unable to admit the claimed ₦30 billion as qualifying recapitalisation capital.

Meanwhile, the owner of NICON Insurance and Nigeria Reinsurance Corporation, Mr. Jimoh Ibrahim, has disputed the regulator’s position.

In an open letter addressed to President Bola Tinubu and published in some national newspapers, Ibrahim presented cheques drawn on Lotus Bank purportedly showing payments of ₦30 billion for Nigeria Re and ₦20 billion for NICON Insurance.

He accused NAICOM of unlawfully demanding a further ₦500 million, which he described as representing one per cent of shareholders’ funds, as well as allegedly requiring the transfer of ₦50 billion and payment of ₦180 million in recapitalisation fees to the regulator.

The allegations represent a sharp disagreement between the affected companies and the regulator over what constitutes compliance with the recapitalisation guidelines and the conditions precedent to capital verification.

NAICOM’s decision to exclude the affected companies therefore raises questions about the distinction between having funds available or making capital claims and satisfying the regulator’s prescribed documentation, escrow, verification and reporting requirements.

With the recapitalisation exercise now concluded, the affected companies could face further regulatory action unless they are able to resolve their outstanding compliance issues in accordance with the applicable law and NAICOM’s requirements.