CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Regulation of Nigeria’s insurance industry has become substantially intensified in the last two decades. This paper critically evaluates the philosophy and challenges of insurance regulation in the context of post-authoritarian governance and increasing economic liberalization in Africa’s potential largest insurance market. The last two decades has witnessed among others, government regulatory intervention through the establishment of a regulator and mandatory recapitalization.

Temporally, the trajectory of developments in the last decade which coincides with post-authoritarian military rule in the country is significant. As a developing economy, the Nigerian insurance industry presents an example of untapped and gross under-utilization of its boundless potentials. Adopting a qualitative approach, this paper explores the factors responsible for the industry’s slow growth in comparison with its huge human and material resources and what lessons might be learnt to chart a way forward.

The first part of the paper traces the origin of insurance in the country to its colonial heritage. The second part examines the rationale for regulating insurance business. The focus then shifts to regulation of insurance in Nigeria. The paper is yet to be concluded as there are outstanding issues for analysis in on which research is still in progress.

Nigeria, a country of more than 140 million people with a landmass of about 923,768.64sq. km and immense human and material resources is a former British colony. Hence, the country shares almost all its political and economic settings from its former colonial heritage. Before the introduction of the modern form of insurance, some form of social insurance had existed in the Nigerian society. These social schemes evolved through the existence of extended family system and social associations such as age grades and other unions (Osoka, 2008). Until 1966, Nigeria copied British parliamentary system of government. This British system still dominates aspects of the country’s socio-economic settings. For instance, the legal practices in Nigeria still reflect its colonial heritage. Economic institutions such banks and insurance companies, in practice, copy the British style of conducting their businesses.2 However, the country’s progress since independence in 1960, has however been undermined by long years of military rule, political instability and systemic corruption. In 1999, a civilian government was finally elected to office after a successful political transition process.