A proposal to exempt foreign insurance companies from paying tax on premiums generated from insurance business written in Nigeria has triggered concern in the insurance industry.

Operators have warned that such a move could undermine the ongoing industry’s reforms and weaken local capacity in the market.

Industry stakeholders said the proposal attributed to recommendations under review by KPMG could incline the competitive landscape sharply against Nigerian insurers at a time when the industry is grappling with rehabilitation, low penetration and weak public confidence.

They argue that granting tax exemptions to foreign insurers while local companies continue to bear the full tax burden would undermine the reform aimed at building a strong, resilient domestic insurance market.

At the heart of the concern is the suggestion that exempting foreign insurers from tax on premiums sourced from Nigeria could help deepen insurance penetration.

Local operators, however, insist that such an approach risks sacrificing long-term sector development for short-term gains.
Speaking specifically on the development at the weekend in an interview with The Guardian, the former Chief Executive of FSL Insurance Broker Limited, Alfred Daudu, said the proposal, if implemented, would amount to
“penalising Nigerian insurers in their own market”.

“You cannot be asking local companies to recapitalise, comply with stricter regulations and still pay full taxes, while foreign firms are given tax holidays to compete for the same risks. It is not reform, it is market distortion.”

Nigeria’s current policy on foreign observance is designed to protect local capacity, ensure value retention within the economy and promote a level playing field.

Industry players noted that the policy also supported job creation, skills development and the growth of local underwriting expertise. Weakening this framework, they argued, could reverse hard-won gains.

Daudu explained that while foreign insurers play an important role, especially in large or specialised risks, tax parity remained essential.

“Foreign participation should complement, not cripple, domestic insurers. If foreign companies are allowed to underwrite Nigerian risks tax-free, local firms will struggle to compete on pricing, and many could be forced out,” he said.

The concerns come at a sensitive time for the sector. The National Insurance Commission (NAICOM) is implementing a far-reaching recapitalisation program aimed at strengthening insurers’ balance sheets and improving claims-paying capacity.

Operators are required to raise significantly higher capacity, a process that has already placed pressure on weaker firms.