Introduction
On August 5, 2025, the Nigerian Insurance Industry Reform Act (the “Act”) was signed into law, reforming the regulatory framework for insurance companies and other entities providing services within the insurance industry. For intermediaries such as insurance agents, brokers, loss adjusters and other stakeholders the new Act seeks to streamline and reform their operational obligations as well as their licensing requirements.
In this article we highlight some key provisions of the Act as they relate to insurance intermediaries, their licensing requirements, penalties for noncompliance and other notable provisions of the Act.
Licensing Requirements for Insurance Intermediaries and Penalties for Noncompliance
Insurance Agents
Insurance agents are typically licensed to market, negotiate, or sell insurance products on behalf of an insurance company.
The Act provides that individuals or entities who intend to carry on business as insurance agents must first be licensed by the National Insurance Commission (the “Commission”). Where an individual is seeking to be licensed by the Commission, the Act requires that such an individual must possess a certificate of proficiency issued by the Chartered Insurance Institute of Nigeria. Where the agent is a company, one of its principal officers must possess the certificate of proficiency, as well as 10 years experience working in an underwriting company.
In addition, the applicant must not have been convicted of an offence involving fraud or dishonesty. Upon approval of the application by the Commission, the licence shall be due for renewal after a period of 3 years. Previously, agents were required to renew their licenses every year.
Individuals or entities operating without a license are liable to imprisonment for a term of 6 months or a fine of N500,000 or both. The entity or individual may also be required to issue a refund of any payment collected for services rendered while acting as an insurance agent. For licensed insurance companies transacting business with unlicensed insurance agents, such companies shall be liable to a sum five times the premiums received in relation to insurance transactions as penalty.
Insurance Brokers
In contrast to insurance agents, insurance brokers act on behalf of the policyholder. They assess risks, negotiate coverage, and assist policyholders throughout the insurance transaction.
An entity intending to operate as an insurance broker is required to be registered under the Companies and Allied Matters Act(“CAMA”). In addition, a partner or the chief executive officer of such a company must be a member of the Chartered Insurance Institute of Nigeria, belong to a recognized body of registered insurance brokers, and possess relevant cognate insurance experience.
Any person or entity that operates as an insurance broker without registration and licensing by the Commission is liable to a fine of N10,000,000 in the case of a corporate entity, or N5,000,000 or imprisonment for a term of 12 months in the case of an individual. Furthermore, any licensed insurance company that transacts business with an unlicensed insurance broker, or with an insurance broker whose licence has expired, shall be liable to pay as a penalty the commission due to it on such transactions.
Furthermore, to operate as an insurance broker, the entity must provide comprehensive risk assessment in respect of the insurance policy. The Act also provides that no insurance broker shall engage in the business of reinsurance brokering without the prior approval of the Commission. In addition, an entity licensed to operate as an insurance and reinsurance brokering firm shall neither directly nor indirectly hold more than 10% interest in any insurance company or loss-adjusting company.
An insurance broker is also required to maintain a professional indemnity cover of not less than N100,000,000 or 50% of its preceding year’s annual brokerage income, whichever is higher, among other regulatory requirements. Under the Insurance Act 2003, insurance brokers were only required to maintain a professional indemnity cover of 10,000,000 or 50% of their annual income for the preceding year.
Loss Adjusters
Loss adjusters are intermediaries who assess or investigate the compensation due to a policyholder in the event of an insurance claim. This category of intermediaries operates on behalf of the insurance company to determine the extent of the loss or damage and to verify the validity and value of the policyholder’s claim. Similar to insurance brokers, loss adjusters are required to be registered under the CAMA. The chief executive officer or executive director of a loss adjusting firm must be a member of the Chartered Insurance Institute of Nigeria as well as a recognized body of loss adjusters. In addition, no partner or director of a company engaged in loss adjustment services shall be concurrently employed by another insurance entity. Upon approval, a loss adjuster’s licence shall be renewed every 5 years. In addition, under the Insurance Act 2003, loss adjusters were required to maintain a professional indemnity cover similar to that required of insurance and reinsurance brokers. However, under the Act, this is no longer a requirement.
Any person or company operating as a loss adjuster without a valid licence commits an offence and shall be liable, on conviction, to a penalty of N500,000 in the case of a company, or N250,000 and imprisonment for a term of twelve (12) months in the case of an individual.
Conclusion
The Act seeks to ensure that only duly licensed intermediaries operate in the insurance value chain and enhance consumer protection whilst also creating an enabling environment for the intermediaries. Ultimately, these reforms are expected to enhance public confidence and promote ethical practices within the insurance industry.
“Aderonke is the Managing Partner and Co-founder of Pavestones, a modern, client-focused, full-service law Practice situated in Nigeria, with a global reach”
