(Ecofin Agency) - Nigerian lawmakers explained that the increase in the minimum capital for companies in the sector was driven by the depreciation of the naira, rising inflation, and the need to curb capital flight.

On December 17, the Nigerian Senate passed a new bill to overhaul the country's insurance sector. The bill includes a major increase in the minimum capital requirements for insurance and reinsurance companies.

Under the new law, non-life insurance companies will now need a minimum capital of 25 billion naira ($16 million), up from the current 3 billion naira. Life insurance companies will need 15 billion naira, compared to 3 billion before. Reinsurance companies will see their capital requirement rise from 10 billion to 35 billion naira.

The Senate Committee on Banking, Insurance and Other Financial Institutions explained that the capital raise is necessary due to the weakening national currency, rising inflation, and the need to reduce Nigeria's dependence on foreign insurance companies. They also noted the importance of covering new, emerging risks.

Mukhail Abiru (pictured), the Committee Chairman, pointed out that the current laws governing the insurance sector have been in place for over 30 years and are no longer able to meet the industry's modern needs or support innovation. This outdated legal framework has led to inefficiencies that have made it harder for the sector to compete globally, he noted.

The bill will now move to the House of Representatives for approval before being signed into law by President Bola Tinubu.