Performance of an economy determines the position of the particular nation in the world. The better the performance of an economy and the large economic resources it holds, the higher the level of influence of such country in the entire world. There are many sectors of human endeavor that form the economic chain of a nation. Among these human activities or commercial activities are oil and gas, manufacturing and construction, education, Banking, Insurance etc. Among these activities, insurance sectors of the economy were examined in order to be refining tune.Insurance sector of the Nigeria economy has witnessed doldrums for the past three decades.Recapitalization of insurance sector of the economy was ventured into to determine whether such a process can be one of the sound instrument to refine tune the Nigeria economy.A lot has been gained from the recapitalization process of insurance sector and the process has resulted into a success.

          The research method used is survey. The sources of data were analytical and descriptive. This focuses on the measurement of the insurance sector’s asset against the Gross Domestic product and the problems that could be encountered during the recapitalization process.

          Data obtain from the analysis of the secondary sources is from 2006 edition of statistical bulletin published by the Central Bank of Nigeria, revealed that asset value against Gross Domestic Product (GDP) from 1987 till 1993 were progressing with (GDP) of the nation on a high side where as from 1994 till 1998 the value of asset were retrogressing with a little difference in the Nation GDP.

          Recommendations were made to the way forward which includes;

  • Government should provide favourable and enabling     environment, like good policies to enable insurance industry     perform efficiently.
  • Seminars, conferences and workshops should be organized by       insurance regulatory body to educate insurer ethics of the      profession.
  • NAICOM should stick to the various rules and regulations        guiding the consolidation process and review from time to time         the needed and required policies. 



Government reforms in the insurance industry through the current process of recapitalization and consolidation are to restore confidence of the public in the market and enhance international competitiveness of local operators.

Consequently, the principal objective of the reform is to have emergence of bigger and stronger players in the industry with enhanced capacity. The Nigeria insurers in time past had operated on marginal scale and that accounted for the reason why the market had not benefited much, especially in the oil and energy business. The country is much more likely to experience sustained growth if her insurance market develops properly.

Insurance market development is related to improve financial sector performance and insurance markets do not develop adequately without both public and private sector development in their infrastructure. The reform is made to develop an insurance sector that drives and protects the economy through effective and efficient market structure.


Today the insurance industry consists of 103 insurance companies, five Reinsurance companies and 350 insurance brokers in Nigeria. The industry has underperformed its role in the financial sector of the economy when compared with its counterparts in other parts of the world.

The history of insurance business can be liked to the olden days. Before the advent of the British merchants in Nigeria, there was no organized insurance business as we know it in recent days. But, there existed some traditional system of risk sharing, which could be described as crude or primitive forms of mutual and social insurance schemes. Age grade association, extended family system, town or clan unions were some of he mutual insurance-like schemes for showing benevolence to their members who had suffered some misfortunes such as death, ill-health, fire ravages or court cases.

However, it was these British merchants who established trading posts, on west coast of Africa that introduced modern insurance business into Nigeria in the 19th century. They arranged insurance for their trading concerns on the London insurance market. By 1900, at least two insurance companies were known to have appointed agents in Nigeria. At that time, the development of Nigeria insurance market patterned the British way. It had sluggish growth and a number of factors were responsible for it.

It was after this that the insurance Act of 1961 which was enforced in 1968 came out. This Act however, did not regulate the investment of insurance funds. Not long afterwards, it became evident that many of the companies licensed under insurance Act 1961 were not investing their funds in Nigerian securities. This situation was corrected by insurance (Miscellaneous provision) Act 1994, which provided that every insurer should invest two-fifth of its previous year’s premium in Nigeria securities.

The post independence insurance business in the country was characterized by low capital requirement of N50,000 for registration, relatively loose pre-registration condition, and little or no post-registration control. These led to proliferation of inadequately capitalized indigenous insurance companies often managed by inexperienced and poorly qualified personnel. Such state of affairs gave rise to the use of the term “mushroom” insurance companies to describe poorly capitalized and ill-managed insurance companies.

In September 2005, the minister of finance announced new capital requirements for insurance companies in Nigeria. The share capital for life business N2billion, Non-life N3billion, Re-Insurance N10billion and composite company N5billion. Insurance companies are expected to meet this new capital requirement by February 2007.

The recapitalization process will lead to consolidation of the insurance industry. This will invariably increase the financial stability and capacity of the insurance companies within the industry. It will also raise the entry barrier and create mega players. The consolidation will herald the emergence of solid and professional institutions that can play their role effectively both in the local and international market.

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