NAICOM Circular Directs Insurers to Exhaust Local Content Capacity Before Offshore Placements

• NAICOM, which the Senate recently passed a bill to rename the Insurance Regulatory Commission (IRC), has issued a circular requiring insurers in Nigeria to exhaust local content capacity before making offshore or overseas placements.
• The circular applies to all types of insurance and reinsurance placements, including non-life and life businesses.
• Nigerian-based reinsurers are expected to increase their market share as a result of the new requirements.
• Lawyers advising insurers must review business strategies to ensure compliance with the local content capacity requirements.

The circular emphasizes that this requirement applies to all types of insurance and reinsurance placements, including those for non-life and life businesses.

The National Insurance Commission (NAICOM), which the Senate recently passed a bill to rename the Insurance Regulatory Commission (IRC) and repeal its enabling Act, has issued a circular directing insurers in Nigeria to exhaust their local content capacity before making any offshore or overseas insurance and reinsurance placements. This move is aimed at promoting the development of the country's insurance industry by encouraging the use of local capacity. Insurers are now required to prioritize the utilization of local capacity, which includes reinsuring risks with Nigerian-based reinsurers, before exploring international markets. The circular emphasizes that this requirement applies to all types of insurance and reinsurance placements, including those for non-life and life businesses.

The NAICOM circular is in line with the country's regulatory framework, which emphasizes the importance of local content in the insurance industry. The Nigerian Insurance Industry Reform Act (NIIRA) 2025, which repealed the Insurance Act 2003, and the National Insurance Commission (Establishment) Act 1997, which the Senate recently passed a bill to repeal, provide a legal basis for the promotion of local capacity in the industry. These laws require insurers to maintain a minimum level of local capacity, which must be utilized before any offshore or overseas placements are made. The circular is also consistent with the government's policy objective of promoting local economic development and reducing reliance on foreign markets.

The NAICOM circular has significant implications for Nigerian insurers, who must now review their business strategies to ensure compliance with the new requirements. Lawyers advising these insurers should be aware of the potential impact on offshore and overseas reinsurance placements, which may need to be revised or renegotiated to meet the local content capacity requirements. The circular also presents opportunities for Nigerian-based reinsurers to increase their market share and contribute to the growth of the country's insurance industry. Overall, the NAICOM circular is a step towards promoting the development of Nigeria's insurance sector and reducing its reliance on foreign markets.

Lawyers advising Nigerian insurers should review the new NAICOM circular to ensure compliance with the local content capacity requirements, which may impact their offshore and overseas reinsurance placements.

Source: Original reporting via NAICOM