The Relationship Between Insurance Regulation and Market Development in Nigeria

This study examines the relationship between insurance regulatory quality and market development in Nigeria, assessing whether NAICOM's regulatory interventions have contributed to or constrained market growth over the period 2013 to 2023. Effective insurance regulation is theorized to promote market development by building consumer confidence, ensuring solvency, and creating a level playing field for competition. However, excessive or poorly designed regulation can raise compliance costs and deter market entry, limiting competition and innovation. This study uses secondary data from NAICOM statistical bulletins, World Bank insurance development indicators, and the IMF Financial Sector Assessment Program reports. Regulatory quality indicators include licensing requirements, solvency supervision intensity, market conduct enforcement, and consumer complaint resolution. Market development is measured using premium density, penetration rate, and market concentration indices. Time series regression and interrupted time series analysis are employed to assess the impact of specific regulatory reforms. Findings reveal that NAICOM's 2007 and 2021 recapitalization exercises significantly reduced the number of licensed insurers while improving average solvency margins and premium growth. Consumer complaint resolution improvements are positively associated with premium growth in subsequent years. The study concludes that regulatory quality improvements have contributed positively to Nigerian insurance market development, but slow product approval processes remain a barrier to innovation. It recommends that NAICOM introduce a regulatory sandbox for innovative insurance products to accelerate market development.

Keywords: insurance regulation, market development, NAICOM, solvency supervision, recapitalization.