Sovereign Trust Insurance Plc has unveiled a proposal to raise up to N20 billion via a mix of share sale options, including public offering, rights issue, or private placement, to bolster its solvency and capital base ahead of sweeping sector reforms.
The capital injection, subject to shareholder approval at the upcoming annual general meeting, would enhance the company's ability to pursue growth and meet stringent regulatory benchmarks under Nigeria's newly enacted insurance reform law.
President Bola Tinubu assented to the Nigerian Insurance Industry Reform Act, 2025 (NIIRA 2025) in August, repealing the outdated 2003 Insurance Act and consolidating regulatory mandates into one comprehensive framework.
Central among its provisions is a sweeping recapitalisation mandate designed to reinforce the sector's resilience, improve policyholder protection, and expand domestic underwriting capacity.
Under NIIRA 2025, new minimum paid-up capital thresholds are now set at N10 billion for life insurers, up from N2 billion; N15 billion for non-life insurers, up from N3 billion and N35 billion for reinsurers, up from N10 billion.
Insurers must comply within 12 months of the Act's commencement or face penalties, including licence revocation or forced mergers or liquidation.
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NAICOM has also directed all insurance and reinsurance operators to submit recapitalisation plans by September 30, 2025, detailing their current capital status, intended source(s) of new capital, timelines, and contingency strategies, including mergers or portfolio run-offs.
Monthly progress reports are mandated, and capital verification exercises are slated to commence on November 1, 2025, concluding by June 30, 2026.
NAICOM and legal analysts noted that the recapitalisation is intended to address chronic undercapitalisation in the industry, reduce overreliance on foreign reinsurers, enhance claims-paying capacity, and ultimately drive greater insurance penetration in an economy where coverage remains below 1 percent of GDP.
Pan-African rating agency Agusto & Co. estimates the reform will drive nearly N600 billion in industry-wide capital injection in 2025 alone, fuelling underwriting expansion, modernised distribution channels, and greater resilience.
Advisory firms like Deloitte emphasise that successful compliance will hinge on strategic planning, access to diverse funding sources (equity, retained earnings), robust Asset-Liability Management (ALM), and adherence to the forthcoming Risk-Based Capital (RBC) regime and IFRS 17 accounting standards.
Against this backdrop, Sovereign Trust's proposal to raise N20 billion positions it favourably, meeting or exceeding the N15 billion threshold for non-life insurers, while building in a cushion to absorb regulatory shocks and support expansion.
The equity raise could serve dual purposes: compliance and competitive positioning. If raised via private placement or rights offering, it may attract long-term institutional investors aligned with the sector's reform agenda. Alternatively, a broader public offering could deepen capital market development.