Tension Grips Insurance Industry Over Proposal In New Tax Reform Bill

As Nigeria’s insurance sector continues to strengthen for deeper market penetration and operational efficiency, there is a looming  fear that the tax reform may disrupt its fragile development.

At the heart of the industry’s growing concern is a proposal in the new Tax Reform Bill to impose levies on Gross Premium Income (GPI), which some experts opine could undercut insurers’ capacity to pay claims and invest in risk management.

“The government is asking us to pay tax on money that doesn’t belong to us,” said Ade Adesokan, a public affairs analyst and insurance professional. “That includes premiums that will go back out as claims or be reserved for future liabilities.”

The Nigerian Insurers Association (NIA) has also warned the lawmakers that taxing GPI instead of actual income will undermine the industry’s solvency, especially for non-life insurers.

The body has formally appealed to the National Assembly for a reassessment of the bill’s provisions.

Chairman of the NIA, Kunle Ahmed has highlighted that insurance operations are unique, arguing, “You don’t tax trust funds held for future events the same way you tax profits.”

Although, recent data from NAICOM underscores the sector’s steady growth: total gross premium written rose to N1.003 trillion in Q4 2023, a 27% leap from 2022. However, net claims also surged to N669.4 billion, reflecting the weight of obligations insurers bear.

Under the bill, recapitalization thresholds have been revised — N15 billion for non-life insurers, N10 billion for life firms, and N35 billion for reinsurers. While this aims to strengthen financial resilience, smaller players face the threat of mergers or exits.

Experts fear the tax could trigger higher premiums, shrink underwriting capacity, and discourage new entrants — all at a time when the market’s penetration remains below 1% of GDP.

NAICOM in response is pushing for the adoption of a Risk-Based Capital model and continued engagement with policymakers.

The commission is also backing the Consolidated Insurance Bill, which promises long-overdue reforms.

For now, all eyes are on lawmakers. The industry hopes that rational dialogue will prevail — one that balances Nigeria’s fiscal needs with policies that don’t choke an industry crucial to economic stability.

“If we get it wrong,” Adesokan cautioned, “we risk stalling the very growth we’ve worked so hard to build.”