What happens when an underwriter’s licence is withdrawn?

This is a question that deserves more attention, especially as the Nigerian insurance industry continues to go through major regulatory and capital reforms. When an insurance company loses its licence, it is not simply a matter of the company closing its doors and walking away. There is a regulatory process that follows, with the interests of policyholders, creditors and other stakeholders coming into focus. Depending on the circumstances and the regulatory action taken by NAICOM, the insurer may be stopped from carrying on new insurance business, its assets and accounts may be secured or placed under regulatory control, and a receiver, liquidator or other appointed professional may take over the affairs of the company. The immediate concern then becomes: What happens to the company’s assets, outstanding liabilities and, most importantly, the claims of policyholders? The appointed professional is expected to establish the company’s financial position, identify and secure its assets, verify liabilities and claims, and administer the winding-up process in accordance with the applicable law and regulatory directives. This is where the importance of adequate capital becomes very clear. Nigeria has gone through different phases of insurance recapitalisation. The 2005/2007 consolidation exercise significantly raised minimum capital requirements and resulted in a major reduction in the number of insurance companies, largely through mergers and acquisitions. There was another attempt at recapitalisation around 2019/2020, including a tiered capital approach, but the process was eventually stalled following legal challenges and resistance within the industry. The latest reform under the Nigerian Insurance Industry Reform Act (NIIRA) 2025 has again placed capital adequacy at the centre of the regulatory conversation, with substantially higher capital requirements for life, non-life, composite and reinsurance businesses. The bigger issue, however, is not just how much capital an insurer has on paper. It is whether that capital is sufficient to absorb losses, support the risks being underwritten and, ultimately, give policyholders confidence that legitimate claims can be paid when they fall due. For insurance professionals, this is an important reminder that recapitalisation is not merely a compliance exercise. At its core, it is about financial strength, market confidence and policyholder protection. And when a licence is eventually withdrawn, the consequences go far beyond the insurer itself. Employees, brokers, agents, policyholders, creditors and other stakeholders can all feel the impact. So, perhaps the more important question is not just, “What happens when an insurer’s licence is withdrawn?” but, “How do we build an industry in which licence withdrawal becomes the exception rather than the inevitable consequence of financial weakness?”**