To understand how insurance operates in Nigeria, it is important to know the history of insurance in Nigeria. The birth of modern insurance in Nigeria is closely associated with the arrival of British Trading Companies. These companies facilitated inter-regional trade in the country. These foreign companies, therefore, needed to deal with some of their risks at a local level. This changed the shape of the insurance sector in Nigeria.
These trading companies were given insurance agency licenses by their foreign authorities from abroad. The licenses allowed the firms to facilitate claims supervision and issue covers.
In 1918, Africa and East trade companies inaugurated the Royal Exchange Assurance Agency. This was the first insurance company in the history of insurance in Nigeria. Other agencies included:
- BEWAC’s Legal and General Assurance
- Patterson Zochonis (PZ) Liverpool
- Law Union and Rock
Due to the tragic effects of the Second World War, trade and commerce suffered both in the United Kingdom and in Nigeria. The initial years of Nigerian insurance companies witnessed slow growth between the 1920s and 1940s. Once the war got over, the insurance industry in Nigeria picked up its pace and made progress that would be embedded forever in the history of insurance in Nigeria.
The first insurance company indigenous to Nigeria was the African Insurance Company Limited. This was established in 1958. On October 1, 1960, the country gained Independence from the British. At the time of Independence there were twenty five insurance companies in Nigeria. Only four of these were owned by Nigerians. In 1961 the J.C. Obande Commission report, a milestone in the history of insurance in Nigeria, was released. This led to the formation of the Nigerian Department of Insurance as part of the Federal Ministry of Trade. This department was later transferred to the Ministry of Finance. The Insurance Companies Act of 1961 made it necessary for insurance businesses to be grouped into various classes for registration. According to provisions of the Act, the office of the Registrar of Insurance was created. The purpose was to manage insurance practice in the country. Minimum capital requirement and other regulations for registration, monitoring, and control of insurance operations- these are some other provisions that fall under the other provisions of the Act.
In 1976, an Insurance Decree was released. This gave authorization to insurers, transfers, modes of operation, administrative, enforcement guidelines and penalties. By this time, the number of indigenous companies had outnumbered the foreign insurance companies.
In 1997, the National Insurance Commission was established. It was given the duty of overseeing and organizing insurance in Nigeria. This body is functioning as the main insurance regulator in Nigeria. An Insurance Special Supervisory Fund was set up in 1989, which made it compulsory for insurance companies to give in 1 percent of their gross earnings to the fund. This also strengthened the Insurance Supervisory Board.
The insurance industry in Nigeria has been steadily growing ever since.