Nigerian insurance stocks swept to their highest level on Friday since the official record began after the adoption of new laws for the industry this week.
PREMIUM TIMES observed that a new directive for underwriters to raise fresh capital drove demand for the shares.
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A momentum of gains began slowly on Monday, but grew much sharper as the week progressed, leading the NGX Insurance Index, the indicator that tracks the performance of the sector in the market, to appreciate by 41 per cent.
Royal Exchange, Prestige Assurance, and Sunu Assurances emerged as the biggest gainers, according to the week’s market report published by the Nigerian Exchange (NGX) on Friday.
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President Bola Tinubu signed the Nigerian Insurance Industry Act 2025 into law on Tuesday, taking obsolete laws out of operation and carving out a new path for insurers and other players to follow. The government said the reforms will play a role among the anchors for achieving its lofty goal of a $1 trillion economy by 2030.
The framework, in consolidating disparate regulations and modernising them to align with global best practices, aggregates the new regulations into a single document for ease of use for stakeholders.
Minimum risk capital is now fivefold higher for life insurance and non-life insurance companies, who require at least N10 billion and N15 billion, respectively, to stay within approved limits. Reinsurance companies are also expected to increase their capital base to N35 billion or more from a baseline of N10 billion before the law was passed to stay the course. Experts expect mergers and other recapitalisation activities to follow.
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“We believe this will bolster the underwriting capacity of insurers, particularly for big-ticket risks in the oil & gas, marine, and large manufacturing sectors,” Lagos-based Meristem Securities said in a research note on Friday, seen by PREMIUM TIMES.
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“As such, this may improve the retention ratio of local insurers and support profitability due to the larger asset base,” it added.
Among the possible dark spots ahead highlighted by the investment bank are low financial literacy and a shortage of insurance products, factors which for decades have made Nigeria’s insurance penetration, at 0.4 per cent, one of the lowest in the world.
Insurance equities reported a yield of 107.6 per cent last year, the second-best-performing of the five sector indexes listed on the NGX.
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