NAICOM begins transition to risk-based supervisory regime

Key points

• The National Insurance Commission is transitioning the insurance sector toward a risk-based supervisory regime and capital structure.
• NAICOM has appointed professional services firm Ernst & Young as Consulting Actuary to finalize and implement the Risk-Based Capital framework.
• The strategic shift is designed to strengthen financial stability and improve policyholder protection across the domestic market.
• The deployment of the new framework will run alongside the conclusion of the ongoing Minimum Capital Requirement recapitalisation exercise.
• Regulatory steps in the coming weeks will include Quantitative Impact Studies and industry-wide data collection to recalibrate key parameters.

Main Story

The National Insurance Commission (NAICOM) is transitioning the insurance sector toward a risk-based supervisory regime and capital structure.

The Chairman of the commission, Mr. Olusegun Omosehin, disclosed this in an official statement released in Abuja. As part of the regulatory body’s ongoing Risk-Based Capital Implementation project, the global professional services firm Ernst & Young (EY) has been appointed to serve as the Consulting Actuary.

In this role, the firm will guide the finalization and implementation of the country’s new Risk-Based Capital (RBC) framework, an institutional shift designed to strengthen financial stability and enhance policyholder protection across the industry.

Following the recent passage of enabling legislation and the execution of the ongoing Minimum Capital Requirement (MCR) recapitalisation exercise, the commission has accelerated its administrative efforts to operationalize an RBC framework specifically tailored to the dynamics of the local insurance market.

The regulatory rollout of the RBC framework is scheduled to align with the conclusion of the current MCR exercise. Immediate steps in the coming weeks will feature Quantitative Impact Studies (QIS) and a comprehensive, industry-wide data collection drive.

These exercises will support the recalibration of key parameters, deepen engagement with sector stakeholders, and guide the formal issuance of the final framework alongside detailed regulatory guidelines. Concurrently, the appointed consulting firm has reaffirmed its commitment to prioritizing the project, pledging to work closely with the regulator and operators to design a practical, implementable framework backed by effective execution tools.

The Issues

• Transitioning the insurance industry from a rigid capital model into a dynamic risk-based supervisory regime.
• Gathering precise, industry-wide data through Quantitative Impact Studies to accurately calibrate local market parameters.
• Harmonizing the conclusion of the Minimum Capital Requirement recapitalization with the deployment of the new RBC framework.

What’s Being Said

• Outlining the operational objectives of the consulting engagement and how it will reinforce the commission’s long-term regulatory framework, Mr Olusegun Omosehin stated: “Under the engagement, EY will support NAICOM to accelerate implementation, strengthen internal technical capacity. The EY will also ensure the resulting regulatory framework is robust, transparent, and fit for purpose within the Nigerian market context.”

What’s Next

• NAICOM will initiate industry-wide data collection and Quantitative Impact Studies in the coming weeks to recalibrate market parameters.
• Ernst & Young will work with the commission to draft and finalize the comprehensive regulatory guidelines for the insurance sector.
• Insurance operators will prepare to align their operational capital models with the new framework upon the conclusion of the MCR recapitalization exercise.

Bottom Line NAICOM has contracted Ernst & Young as Consulting Actuary to finalize a new Risk-Based Capital framework for the insurance industry, introducing Quantitative Impact Studies in the coming weeks to align with the conclusion of the ongoing minimum capital recapitalization exercise.