INSURANCE ACT 2007

Classification of insurance business
(a) The Act provides for two main classes of insurance as follows:
(i) Life insurance business; and
(ii) General insurance business.
(b) In the case of life insurance, there shall be three categories:
(i) individual life insurance business;
(ii) group life insurance and pension business; and
(iii) health insurance business.
(c) In the case of general insurance, there shall be eight categories:
(i) fire insurance business;
(ii) general accident insurance business;
(iii) motor vehicle insurance business
(iv) marine and aviation insurance business;
(v) oil and gas insurance business;
(vi) engineering insurance business;
(vii) bonds credit guarantee and suretyship insurance business; and
(viii) miscellaneous insurance business. (Section 2).

Minimum paid-up share capital

No insurer shall carry on insurance in Nigeria unless the insurer has and
maintained, while carrying on that business, a paid-up share capital of the
following amounts as the case may require, in the case of:
(a) Life insurance business, not less that N150,000,000;
(b) General insurance, not less that N200,000,000;
(c) Composite insurance business, not less than N350,000,000; or
(d) Reinsurance business, not less than N350,000,000 (Section 9).

Records to be kept by insurer

(a) An insurer shall keep and maintain at its principal office the following-
(i) the Memorandum and Articles of Association or other evidence
of the constitution of the insurer;
(ii) a record containing the names and addresses of the owners of
the insurance business whether known as or called shareholders
or otherwise;
(b) the minutes of any meeting of the owners and of the policy-making
executive (whether known as or called the Board of Directors or
otherwise);
(c) a register of all policies in which shall be entered in respect of every
policy issued, the names and address of the policy-holder, the date when
the policy was effected and a record or any transfer, assignment or
nomination of which the insurer has notice;
(d) a register of claims in which shall be entered every claim made together
with the date of claim, the name and address of the claimant and the
date on which the claim was settled, or in the case of a claim which is
repudiated, the date of repudiation and the grounds for the rejection or
in the case of litigation, the particulars of the litigation and the decision
of the court in the matter;
(e) a register of investment showing those which are attributable to the
insurance funds and those which are not, and also any alteration in
their values from time to time;
(f) a register of its assets;
(g) a register of reinsurance ceded in showing separately those ceded in
Nigeria and those ceded outside Nigeria;
(h) a cash book;
(i) a current account book;
(j) a register of open policies in respect of marine insurance transactions;
(k) management report by external auditors; and
(l) An insurer shall in respect of its life insurance business maintain and
keep the following additional record, that is
(i) a register of assured under group policies;
(ii) a register of loans on policies;
(iii) a register of cash surrendered values; and
(iv) a register of lapsed and expired policies (Section17).

Records to be Kept by Re-insurer

(a) A re-insurer shall keep and maintain at its principal office the following:
(i) the Memorandum and Articles of Association or other evidence
of the constitution of the reinsure;
(ii) records containing the names and address of the owners of the
re-insurer (whether known as or called shareholders or otherwise);
(iii) minutes of any meeting of the owners and of the policy-making
executive (whether known as the Board of Directors or otherwise);
(iv) a register of all treaties, in which shall be entered in respect of
every treaty issued, the name of the cedant, and the date when
the treaty was effected;
(v) a register of all claims, in which shall be entered every claim
made together with the date of claim, the name of the cedant or
insured, their proportionate share and the date the claim is
settled;
(vi) a register of events showing those which are attributable to the
insurance funds and those which are not also any alteration in
value from time to time;
(vii) a register of assets;
(viii) a register of business or retrocession, showing separately those
ceded within and outside Nigeria;
(ix) a register of new and existing clients;
(x) a cash book; and
(xi) domestic or management report prepared by external auditors.
(b) A life re-insurer shall keep the following additional records:
(i) a register of assured under group policies;
(ii) a register of cancelled, lapsed and expired policies; and
(c) a register of claims showing the name of the cedant and when the claim
is settled. (Section 18).

Separation of Accounts and Reserve Funds

(a) Where an insurer carries on the two classes of insurance business, all
the receipts of each of those classes of insurance business shall be entered
in a separate and distinct account and shall be carried to and form a
separate insurance fund with the appropriate name so that in case of
life insurance there shall be:
(i) the individual life insurance business fund;
(ii) the group life insurance business and pension fund; and
(iii) health insurance business.
(b) Each insurance fund shall represent the liabilities in respect of all
contracts of insurance of that particular class and shall consist:
(i) in the case of life insurance business, the life business funds shall
be a sum not less than the mathematical reserve; and
(ii) in the case of general insurance business of the provisions for
unexpired risk and provisions estimated to provide for the
expenses of adjustment or settlement of such claims.
(c) The insurance fund of each particular class shall:
(i) be absolutely the security of the policy holders of that class as
though it belonged to an insurer carrying on other business than
insurance business of that class;
(ii) not be liable for any contract of the insurer for which it would not
have been liable had the business of the insurer been only that
of particular insurance class; and
(iii) not be applied, directly or indirectly, for any purposes other than
those of the class of business to which the fund is applicable.
(Section 19).

Provisions for Unexpired Risks and Claims

(a) An insurer shall in respect of its general business, establish and
maintain the following provisions applicable in respect of each class of
insurance business:
(i) provisions for unexpired risks which shall be calculated on a time
apportionment basis of the risks accepted in the year;
(ii) provision for outstanding claims which shall be credited with an
amount equal to the total estimated amount of all outstanding
claims with a further amount representing 10 per centum of the
estimated figure for outstanding claims in respect of claims
incurred but not reported at the end of the year under review;
and
(iii) provision for outstanding claims (Section 20).

Contingency Reserves

(a) An insurer shall establish and maintain contingency reserves to cover
fluctuations in securities and variation in statistical estimates.
(b) The contingency reserves shall be credited with an amount not less than
3 per centum of the total premium or 20 per centum of the net profits
(whichever is greater) and the amount shall accumulate until it reaches
the amount of the minimum paid-up capital or 50 per centum of the net
premiums (whichever is greater). (Section 21).

Reserve for Life Insurance Business

An insurer shall in respect of its life insurance business maintain the following
reserve:
(a) A general reserve fund which shall be credited with an amount equal to
the net liabilities on policies in force at the time of the actuarial valuation
and an additional 25 per cent of net premium for every year between
valuation date; and
(b) A contingency reserve fund which shall be credited with an amount equal
to 1 per cent of the gross premiums or 10 percent of the profits (whichever
is greater) and accumulated until it reached the amount of the minimum
paid-up capital. (Section 22).

Reserve of Re-insurers

A re-insurer shall establish a general reserve fund which shall be credited
with an amount:
(a) Not less than 50 per centum of his insurer’s gross profit for the year
where the fund is less than the authorised capital of the insurer; and
(b) Not less than 25 per centum of the re-insurer gross profit for the year
where the fund is equal to or exceed the authorised capital of the reinsurer.
(Section 23).

Solvency Margin

(a) An insurer shall in respect of its business other than its life insurance
business, maintain at all times a margin of solvency being the excess of
the value of its admissible assets in Nigeria over its liabilities in Nigeria
consisting of:
(i) Provisions for unexpired risks;
(ii) Provision for outstanding claims;
(iii) Provisions for claims incurred but not yet reported; and
(iv) Funds to meet other liabilities.
(b) The solvency margin referred to in subsection (1) of this section shall
not be less than 15 per centum of the gross premium income less
reinsurance premium paid out during the year review or the minimum
paid-up capital which ever is greater;
(c) For the purpose of calculating the solvency margin, all monies owned
by policy holders, brokers or agents by way of premiums due to but not
received by the insurer as at the end of the relevant year shall not count
as admissible assets or be included in determining qualifying liabilities;
(d) Any amount due as liability to re-insurers which are attributable to
outstanding premium in respect of the current year excluded under the
above shall be excluded from liabilities;
(e) An auditor who audits a balance sheet profit and loss and revenue
account of an insurer under section 28 of this Act shall insure a
certification stating the extent to which the insurer has satisfied the
margin of solvency required under this section;
(f) If the Commission is not satisfied with a certification issued under this
section, it may conduct an independent investigation on the matter with
a view to determining what action to take against the insurer or the
auditor;
(g) Where an investigation conducted discloses a false certification by an
auditor, the Commission may make a report on the auditor to the
appropriate professional body for necessary disciplinary action;
(h) Where an insurer or reinsurance company fails to account of its being
insolvent, any auditor or official of the Commission who in the 3 previous
years certifies the said company as being solvent shall be held liable;
(i) In this section - “admissible assets” means assets designated as
admissible assets consisting of the following:
(i) Cash and bank balance;
(ii) Quoted investment at market value;
(iii) Unquoted stock at cost;
(iv) Land and building;
(v) Furniture and fittings;
(vi) Office equipment;
(vii) Motor vehicles;
(viii) Prepaid expenses made to member of staff;
(ix) Amount due from retrocession;
(x) Staff loans and advance; and
(xi) Claims receivable. (Section 23).

Investment

(a) An insurer shall at all times in respect of the insurance transacted by it
in Nigeria, invest and hold invested in Nigeria assets equivalent to not
less than the amount of policy holder’s funds in such accounts of the
insurer;
(b) The policy-holder’s funds shall not be invested in property and securities
expect:
(i) shares of limited liability companies;
(ii) shares in other securities of a co-operative society registered
under a law relating to co-operative societies;
(iii) loans to building societies approved by the Commission;
(iv) loans on real property, machinery and plant in Nigeria;
(v) loans on life policies within their surrender values;
(vi) cash deposit in or bills of exchange accepted by licensed banks;
and
(vii) such investments as may be prescribed by the Commission.
(c) No insurer shall:
(i) in respect of its general insurance business, invest more than 35
per centum of its assets as defined in subsection (1) of this section
in real property; or
(ii) in contract of its life insurance business, invest more than 35 per
centum of its assets as defined in subsection (1) of this section in
real property.
(d) An insurer which contravenes the provisions of this section commits an
offence and is liable on conviction to a fine of N50,000. (Section25).

Statements of Accounts, etc.

(a) An insurer shall not later than 30 June of each year submit in writing to
the Commission the following:
(i) a balance sheet duly audited showing the financial position of
the insurance business of the insurer and its subsidiaries at the
close of that year together with a copy of the relevant profit and
loss account which the insurer is to present to its shareholders
at its annual general meeting;
(ii) a revenue account applicable to each class of insurance business
for which the insurer is required to keep separate account of
receipts and payment; and
(iii) a statement of investments representing the insurance funds.
(b) The returns and accounts required to be submitted under subsection (1)
(a) and (b) of this section shall be in such form as may be approved by
the Commission;
(c) An insurer which fails, neglects or refuses to file the returns and accounts
under this section commits an offence and is liable on conviction to a
fine of N5,000 per day for each day of default.
(d) An insurer shall in each year after receipt of the approval of the
Commission, publish its general annual balance sheet together with its
profit and loss accounts in at least one newspaper having wide
circulation in Nigeria.
(e) No insurer shall distribute any dividends until the Commission has
approved the annual returns of the insurer within 30 days of its
submission to the Commission. (Section 26).

Life Insurance accounts

(a) An insurer transacting life insurance business shall submit to the
Commission every three years in the prescribed form, the following:
(i) an abstract of the report if an actuary and valuation report of the
life insurance business;
(ii) a summary and valuation of the life policies;
(iii) a table showing premium, policy reserve values and guaranteed
surrender values together with the relationship between premium
paid and such guaranteed surrender values; and
(iv) a certificate of solvency signed by an actuary stating that the
value of the assets representing the funds maintained by the
insurer in respect of the life insurance business exceeds the value
of the liabilities.
(b) The commission may require an insurer transacting business to:
(i) cause the person who is for the time being the actuary of the
insurer to make an investigation into its financial condition
(including evaluation of its liabilities) in respect of that business
as at a specified date;
(ii) cause an abstract of that person’s report of the investigation to
be made and submitted to it;
(iii) prepare and submit to it a statement of its life insurance business
or part thereof as at the date of the request; and
(iv) show sufficient evidence that not more than 40 per centum of the
actuarial surplus declared is appropriated for shareholders.
(c) An insurer transacting life insurance shall at the expiration of each year:
(i) prepare with reference to that year in the prescribed form a
statement and exhibit of the life policies; and
(ii) submit the statement and exhibit together with such other
document and information relating to the relevant accounts and
balance sheet (including copies of reports on the affairs of the
insurer for the year as submitted to the policy-holders of the
insurer as the Commission may from time to time require.
(d) On receipt of the documents mentioned in subsections (2) and (3) of
this section, the Commission shall, if it appears to it that the statement
furnished by an insurer under any of those subsections is inaccurate or
is prepared in the prescribed form, or is defective in any material
particular:
(i) require from the insurer such further information as it may
consider necessary;
(ii) call on the insurer to submit for its examination any book of
account, register or any other document;
(iii) require the insurer to confirm on oath or by or a sworn declaration
the authenticity of any statement submitted by the insurer;
(iv) refuse to approve the insurer’s annual statement unless or until
the inaccuracies have been supplied.
(e) An insurer who fails, neglects or refuses to file the required returns or
accounts under this section is guilty of an offence and liable on conviction
to a fine of N5,000 per day for every day of default.
(f) An insurer shall in each year after receipt of the approval of the
Commission publish its general annual balance sheet together with its
profit and loss account in at least one newspaper having wide circulation
in Nigeria. (Section 27).

Audits

(a) The balance sheet profit and loss account and revenue account of an
insurer in respect of the insurance business transacted by the insurer,
shall be audited annually by an external auditor.
(b) At the conclusion of the audit, the auditor shall issue certificate signed
by him stating whether in his opinion:
(i) He has obtained adequate information from the books and records
of the insurer;
(ii) The books of the insurer have been properly kept and the affairs
and transactions of the insurer have been properly recorded;
(iii) The accounts and balance sheet of the insurer are in accordance
with the information given to him for the purpose of his audit;
(iv) The accounts and balance sheet are in accordance with the
applicable provisions of this Part of this Act; and
(v) The balance sheet of the insurer and the profit and loss account
respectively gives a true and fair view of the financial position of
the insurer. (Section 28).

Actuarial Valuation

(a) An insurer transacting life insurance business shall in respect of its life
insurance business once in every period of three years, cause an
investigation to be made into its financial position by an actuary
appointed or secured by the insurer;
(b) An investigation under subsection (1) of this section shall include:
(i) a valuation of the assets and liabilities of the insurer; and
(ii) a determination of any excess over those liabilities of the assets
representing the funds maintained by the insurer.
(c) For the purpose of an investigation under this section, the value of any
asset and the amount of liability shall be determined in accordance
with applicable valuation regulations. (Section 29).

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