Insurance Experts Express Concern Over NAICOM’s Ban on Coinsurance Between Takaful and Conventional Firms

The Nigerian insurance industry is currently facing a regulatory shockwave as the National Insurance Commission (NAICOM) introduces a ban on coinsurance arrangements between Takaful operators and Conventional insurance companies, a move which industry experts are reportedly faulting.

The directive, contained in a circular titled “Prohibition of Coinsurance Arrangements Between Takaful Companies and Conventional Insurance Companies,” is scheduled to come into effect on January 1, 2026.

NAICOM’s Rationale

NAICOM stated that the decision follows a review of current market practices and is necessary to create clear regulatory boundaries. The primary driver, according to the Commission, is the imperative to uphold the integrity of Takaful as a strictly Shari’ah-compliant financial model.

The regulatory body explained that operational entanglement with conventional insurers could lead to potential systemic risks and, most importantly, halt practices that might erode public confidence or cause reputational harm to Takaful operators in Nigeria. Consequently, the new policy mandates that Takaful operators shall not engage in any coinsurance arrangement based on conventional insurance principles, and vice versa.

The Commission, however, clarified that the prohibition does not extend to Retakaful arrangements with conventional reinsurance companies, a measure that will remain in place pending the development of adequate Retakaful capacity within the Nigerian market.

Industry Experts’ Critique

While NAICOM’s push for regulatory clarity and Shari’ah compliance is noted, insurance experts have begun to express strong reservations about the total prohibition on coinsurance. Critics of the ban suggest that restricting the co-sharing of risks between the two models could negatively impact the overall risk capacity of the Takaful segment.

Currently, coinsurance allows Takaful operators, which often have smaller capital bases, to participate in underwriting large, complex risks alongside conventional firms. Experts argue that the ban may inadvertently limit Takaful operators to only small-to-medium-scale risks, thereby hindering their market expansion and contributions to the nation’s low insurance penetration rate. The industry is now awaiting further communication from NAICOM or a formal appeal from the expert community detailing the potential adverse market effects of the January 2026 directive.