MURIC Urges NAICOM to Withdraw Circular Banning Co-insurance Between Takaful and Conventional Insurers

The National Insurance Commission (NAICOM), Nigeria’s insurance regulatory body, is currently facing pressure from the Muslim Rights Concern (MURIC) to rescind a recent circular prohibiting co-insurance arrangements between Takaful and conventional insurance companies.

The circular, titled “Prohibition of Coinsurance Arrangements Between Takaful Companies and Conventional Insurance Companies,” was issued on August 21, 2025, and stipulates that the ban on joint business between the two insurance models will take full effect from January 1, 2026.

NAICOM stated that the decision was driven by the imperative to uphold the integrity of Takaful as a strictly Shariah-compliant financial model. The Commission argued that establishing clear regulatory boundaries is essential to ensure financial soundness and mitigate potential systemic risks that may arise from operational entanglements with conventional insurers. According to NAICOM, continued co-insurance could erode public confidence and cause reputational harm to Takaful operators in the country.

The directive mandates that a Takaful Operator shall not engage in any co-insurance arrangement based on conventional insurance principles with a conventional insurer, and vice-versa.

However, the ban has drawn criticism, most notably from MURIC, which is urging the regulator to withdraw the circular. While NAICOM maintains the move is to preserve the Shariah principles underlying Takaful, critics argue that the prohibition may limit the capacity of Takaful operators to underwrite large-scale and complex risks by restricting their ability to share risk with larger conventional firms.

It is noteworthy that the circular makes an exception for Retakaful (Islamic reinsurance) arrangements with conventional reinsurance companies, allowing them to continue for the time being. This temporary allowance is pending the development of adequate Retakaful capacity within the Nigerian insurance market. The ongoing controversy pits regulatory efforts to ensure Shariah compliance against practical concerns regarding the operational capacity and growth of the Takaful segment.