Ex-insurance regulator warns against govt meddling in industry recapitalisation

Mohammed Kari, former commissioner for Insurance and former managing director of NICON Insurance and Nigeria Reinsurance Corporation(Nigeria Re), has warned the Federal Government against intervening in the regulatory actions of the National Insurance Commission (NAICOM), in the ongoing recapitalisation of the sector, arguing that doing so could undermine and weaken confidence in the industry.

In an open letter to the Minister of Finance and Coordinating Minister of the Economy dated August 12, Kari, who was former commissioner for Insurance/CEO of NAICOM faulted what he described as attempts by NICON Insurance and Nigeria Re to secure political intervention over regulatory requirements arising from the implementation of the Nigerian Insurance Industry Reform Act (NIIRA) 2025.

Kari’s intervention comes against the backdrop of petitions by the two companies to the Ministry of Finance over NAICOM’s regulatory demands, including issues surrounding recapitalisation, capital verification and escrow requirements. He argues that allowing the ministry to intervene in matters that fall within NAICOM’s statutory mandate risks turning regulatory enforcement into a political negotiation.

“I write this as an open letter to you, deliberately choosing a public medium in the interest of total transparency,” Kari said, explaining that the dispute goes beyond the two companies and touches on the structure and credibility of the insurance market.

On Kari’s letter to the Ministry of Finance, an industry expert said, “He is indeed in an amazingly unique position given the circumstances. So glad he has spoken up. “A strong and well written letter. Let’s see what Jimoh Ibrahim’s benefactors cook up. We wait in renewed hope that PBAT’s reform agenda will not be selective in application, the expert said, qualifying the letter by Mohammed Kari, the Wazirin Bauchi.

Kari’s central argument is that Nigeria cannot build a stronger insurance industry if some operators are allowed to negotiate their way around rules that other companies have spent significant resources complying with.

According to him, more than 90 percent of insurance operators have followed the recapitalisation process by raising fresh capital, depositing required reserves with the Central Bank of Nigeria, undergoing verification and settling regulatory fees.

Against this backdrop, he says granting NICON and Nigeria Re special treatment would punish companies that complied with the law while rewarding those seeking exemptions through political channels.

The issue, therefore, is bigger than whether the two companies should be allowed additional time or regulatory concessions. For Kari, it is about who ultimately has the authority to determine whether an insurer has met the requirements for operating in Nigeria.

NIIRA 2025, he argues, gives NAICOM the statutory responsibility to enforce the rules governing operators. He specifically points to Sections 8(6) and 8(9), saying the provisions set out what should happen when an operator’s licence is cancelled without assigning the Ministry of Finance a role in that process.

Read also: An open letter to the Honourable Minister of Finance

His question to the minister is therefore straightforward, if the law has assigned regulatory enforcement to NAICOM, why should the ministry intervene or overrule the regulator?

According to Kari, NICON and Nigeria Re are not ordinary entrants to the market. Both were established by the Federal Government, NICON in 1969 and Nigeria Re. in 1977, and they have played a foundational role in developing domestic underwriting and reinsurance capacity.

Kari acknowledges that legacy, noting that the institutions trained generations of Nigerian and West African insurance professionals and were once pillars of the industry.

But he argues that their historical importance cannot become a permanent exemption from current regulatory requirements. Following their privatisation in the mid 2000s, he says, both institutions suffered governance problems, balance-sheet pressures and operational decline, with interventions by NAICOM and Asset Management Corporation of Nigeria (AMCON at different periods.

That history is important to the current dispute because it raises the question of whether the government should preserve an institution because of what it once represented, or insist that every operator meet the same financial and prudential standards.

The former insurance commissioner says allowing the Ministry of Finance to become an avenue of appeal against NAICOM’s enforcement decisions would create what he calls an “uneven playing field.”

Companies that have raised capital, paid regulatory fees and submitted themselves to verification would effectively bear the cost of compliance, while companies receiving concessions could continue operating without meeting the same standards.

That, he argues, could create an artificial cost advantage for non-compliant operators and undermine incentives for other insurers to strengthen their balance sheets, and more importantly, it could send a damaging signal to investors.

He said Insurance recapitalisation is ultimately intended to produce better-capitalised institutions capable of absorbing shocks, paying claims and supporting economic activity. If investors conclude that capital requirements can be weakened through political intervention, the credibility of the reform itself becomes questionable.

Kari identifies four potential consequences to such intervention, including unfair competition, reduced incentives for genuine capital building, weaker investor confidence and greater risk to policyholders.

He acknowledges that governments can intervene where the collapse of a major financial institution presents a genuine systemic risk, a “too big to fail” situation in which failure could trigger wider economic damage.

According to Kari, both institutions have suffered significant declines in market share and operational scale and no longer have the market footprint that could make their failure a systemic threat to Nigeria’s financial system. His argument is that the government should not deploy a systemic-risk justification to shield companies whose difficulties do not pose such a threat.

This distinction is central to the letter, urging that government intervention should address systemic risk, not provide regulatory relief to individual companies struggling to meet industry-wide standards.

Kari also draws a comparison with other financial regulators, particularly the Central Bank of Nigeria and the National Pension Commission.

His argument is that regulated entities in banking and pensions generally understand that recapitalisation and prudential requirements are matters for their respective regulators, rather than issues to be negotiated through the Ministry of Finance.

Allowing insurance companies to approach the ministry whenever they disagree with NAICOM, he warns, could reduce NAICOM to an ineffective regulator whose decisions can be challenged through political channels. That would create regulatory arbitrage at precisely the point when Nigeria is trying to strengthen financial-sector institutions.

The implication extends beyond insurance, he said, noting that a credible regulatory environment requires investors to know that rules apply consistently, enforcement is predictable and capital requirements cannot be circumvented through government intervention.

The stakes are particularly high because the recapitalisation is intended to make the insurance industry more capable of supporting Nigeria’s economic growth.

A stronger insurance sector can absorb corporate and household risks, mobilise long-term funds, support infrastructure and investment, and reduce the financial shock from disasters and business failures.

If weakly capitalised insurers remain in the system because of political concessions, the consequences may ultimately fall on policyholders. Kari argues that regulatory standards exist primarily to ensure that insurers have the financial capacity to meet claims when losses occur.

The danger, therefore, is not simply that one or two companies may receive preferential treatment, but that the broader purpose of recapitalisation could be diluted, Kari stated.