Nigerian insurance consumers have long grappled with anxiety over the possibility of financial institutions collapsing and leaving them empty-handed. This worry has proven justified in the insurance sector, where multiple companies have shut down over the years, abandoning policyholders without recourse and eroding trust in the industry.
The National Insurance Commission, Nigeria’s insurance regulatory body, currently has one company under interim management. African Alliance Insurance Plc, among the country’s oldest life assurance firms, represents the most recent example of this recurring problem.
NAICOM took decisive action on October 30, 2024, dissolving African Alliance’s Board and Management using its regulatory authority. The move followed years of financial troubles and the company’s failure to meet its obligations to policyholders and annuitants.
According to the Commission, its intervention came after a thorough examination of the insurer’s finances, governance structures, and operations. The assessment uncovered fundamental problems that threatened the company’s capacity to function sustainably.
NAICOM’s official statement indicated that its comprehensive evaluation identified significant concerns about African Alliance’s viability, particularly its chronic inability to settle claims and make annuitant payments. These persistent failures had generated widespread uncertainty and damaged public confidence in the institution.
The regulator installed Dr. Haruna Mustapha as Chairman and Mr. Jacob Erhabor as Managing Director and Chief Executive Officer, supported by additional executive and non-executive directors, tasked with managing the company and rehabilitating its financial position.
During a recent seminar for insurance journalists held in Ogun State, NAICOM Commissioner Mr. Olusegun Ayo Omosehin announced that the Commission had settled all outstanding annuitant obligations at African Alliance Insurance Plc. He emphasized that not a single customer remained unpaid.
Omosehin clarified that NAICOM’s intervention aimed to safeguard annuitants, policyholders, and other stakeholders while maintaining stability across the wider insurance sector. The action was essential to bringing African Alliance back into operational and financial compliance with regulatory requirements.
The Commissioner drew attention to an important feature of the newly enacted Nigerian Insurance Industry Act 2025, which contains a policyholder-friendly mechanism called the Policyholders’ Protection Fund. This provision, outlined in Section 212 of the legislation, was created specifically to shield policyholders when insurers face insolvency.
The Fund serves to guarantee financial security for insurance customers by covering unpaid claims when a licensed insurer or reinsurer experiences distress, becomes insolvent, or loses its operating license. Resources for the Policyholders’ Protection Fund come from two sources: a quarter-percent levy on insurers’ and reinsurers’ gross premium income, plus an equivalent quarter-percent contribution from the Security and Insurance Development Fund.
Omosehin assured Nigerians that this new arrangement eliminates concerns about the safety of their insurance investments. He stated that the Fund would protect their returns and prevent policyholders from suffering losses should a company collapse.
The NAICOM chief committed to continued proactive efforts aimed at preventing insurance companies from reaching insolvency. He stressed that ensuring payment of legitimate claims remains fundamental to his administration and critical to rebuilding public confidence in the sector.
Omosehin further promised collaboration with all parties, including annuitants, policyholders, employees, and investors, to reduce disruption and maintain continuity. He reinforced his dedication to preserving stability, transparency, and integrity throughout Nigeria’s insurance industry.
Mr. Sunday Okwute, a property entrepreneur and policyholder based in Lagos, welcomed the new Fund provision in the insurance legislation. He praised NAICOM’s forward-thinking approach and encouraged Nigerians to back the Commission’s initiatives. Drawing a parallel, he noted that if the NDIC can protect bank depositors’ funds, insurance policyholders deserve similar protection.
Okwute expressed enthusiasm about the Policyholders’ Protection Fund while hoping it would be more than theoretical. He emphasized that Nigerians need confidence that their entrusted wealth is secure. While appreciating NAICOM’s commitment, he urged the regulator not to wait for insurers to fail but to prioritize policyholder interests consistently, noting that without customers, insurance companies cannot exist.
Ahmed Lukeman, a mid-sized business owner in Ibadan and insurance consumer, responded with cautious optimism about the Fund. He insisted that the designated protection mechanism must operate strictly according to legal provisions. Lukeman reminded NAICOM, operators, and industry stakeholders that mistrust of insurance service providers created the current confidence crisis, which has severely damaged the sector’s reputation among millions of Nigerians.
He acknowledged NAICOM’s comprehensive efforts to restore lost trust and confidence in insurance. According to him, the Fund has somewhat improved the confidence level of Nigerians, particularly potential policyholders, by assuring backup protection against unforeseen circumstances. However, he cautioned that NAICOM and operators must demonstrate complete transparency, accountability, and promptness in all actions taken on behalf of Nigerians, especially insurance consumers.
