NAICOM inaugurates policyholder protection fund to safeguard insurance clients

The National Insurance Commission on Friday inaugurated the Insurance Policyholders’ Protection Fund Committee in Abuja, a move aimed at protecting policyholders from losses when insurance companies fail.

The Commissioner for Insurance, Olusegun Omosehin, said the fund would serve as a statutory safety net for policyholders whenever an insurer becomes insolvent or is unable to meet its obligations. He explained that the establishment of the committee under the Nigerian Insurance Industry Reform Act 2025 marks a significant step toward strengthening consumer protection and market confidence.

Omosehin stated that the fund would be used to resolve distress and insolvencies of licensed insurers and reinsurers, as well as cases of licence cancellation. He noted that the fund’s value goes beyond compensation, as it protects households and businesses from avoidable losses and helps preserve stability across the insurance market.

The commissioner outlined the committee’s mandate, which includes ensuring timely collection of contributions, establishing sound management and investment practices, and providing transparent procedures for disbursement and recovery of loans from the fund.

The Minister of Finance, Taiwo Oyedele, represented by Permanent Secretary Raymond Omachi, described the inauguration as a milestone in the implementation of the 2025 reform act. He said the new law introduces a modern risk-based regulatory framework to strengthen oversight and enhance policyholder protection.

The Executive Vice Chairman of the Federal Competition and Consumer Protection Commission, Tunji Bello, noted that many consumers had suffered losses due to inadequate protection when insurers became insolvent. He said the new fund would reduce the burden on consumers during institutional failures.

The Chairman of the Nigerian Insurers Association, Kunle Ahmed, disclosed that insurers initially opposed the fund due to concerns over financial burden but later embraced it after recognising its importance in restoring public trust.

Under the new guidelines, affected insurers are required to remit 0.25 per cent of their net premium income into the fund annually, with a deadline of June 30 each year.