Beyond Recapitalisation: Why Capability Will Define Insurers’ Credit Strength

The completion of Nigeria’s latest insurance recapitalisation exercise has strengthened the financial base of the industry, but stakeholders have been urged to recognise that meeting regulatory capital requirements alone does not automatically translate into stronger credit profiles.

The National Insurance Commission (NAICOM) has cleared 48 insurance companies and two reinsurance companies that met the new minimum capital requirements under the Nigerian Insurance Industry Reform Act (NIIRA).

While the exercise has improved the financial capacity of the affected firms, attention is now shifting to how effectively insurers can preserve, manage and deploy their capital in an increasingly complex operating environment.

According to an analysis by DataPro, capital provides insurers with the financial capacity to absorb unexpected claims, investment losses and other shocks, while also supporting greater underwriting capacity and financial flexibility.

However, a larger capital base does not necessarily guarantee a stronger credit profile, as rating agencies also assess the quality, sustainability and resilience of an insurer’s capital under different operating conditions.

This position was reinforced at the recently concluded Risk Audit and Compliance Committee (RACC) 2026 Annual Retreat, themed, “Capability: Driving Resilience, Innovation & Trust through Governance, Risk & Compliance.”

A key message from the retreat was that while capital may provide an organisation with the opportunity to operate and grow, capability is critical to long-term survival.

“Capital gets in the room. Capability keeps you in business,” was one of the central messages at the retreat.

For the insurance industry, this means that the key question in the post-recapitalisation era is no longer simply whether an insurer has sufficient capital, but whether it possesses the governance structures, risk management framework, controls, reliable data, technology and expertise required to protect and deploy that capital effectively.

The retreat highlighted what it described as a resilience chain: Governance, Risk, Controls, Data, Capability and Trust.

Governance provides strategic direction, while risk management helps organisations identify and manage exposures. Effective controls promote discipline, reliable data supports sound decision-making, and strong human resources, systems and technology enhance organisational capability.

Together, these elements build trust and support sustainable financial strength.

For rating agencies, these factors are particularly important because capital can be quickly eroded where underwriting is poorly managed, internal controls are weak, risks are excessively concentrated or management decisions are not supported by reliable information.

Despite the stronger capital buffers created by recapitalisation, insurers will continue to face a range of risks capable of testing their financial strength.

Counterparty and credit risks may arise from exposures to banks, reinsurers and other counterparties, particularly where such exposures are concentrated.

Underwriting risk also remains a major concern, as inadequate pricing, poor reserving practices and inefficient claims management could weaken profitability and put pressure on capital.

Operational risks, including technology failures, fraud and weaknesses in internal controls, could equally result in unexpected financial losses and reputational damage.

DataPro noted that the ability of insurers to anticipate and effectively manage these risks would be just as important as the size of their capital base.

The analysis concluded that while recapitalisation has provided compliant insurers with greater financial capacity, the next phase for the industry will be about converting that capacity into sustainable resilience and stronger credit quality.

Ultimately, sustainable credit strength will depend not only on how much capital an insurer holds, but also on the quality of governance, risk management, controls, data and organisational capability supporting that capital.

In essence, while capital provides the capacity to absorb shocks, capability determines how effectively that capacity is preserved and deployed a relationship expected to play a defining role in insurance ratings in Nigeria’s post-recapitalisation era.

Courtesy: DataPro, September 2026.