L o a d i n g

An Overview and Benefits of the Nigerian Insurance Industry Reform Act, 2025

Introduction

The Nigerian Insurance Industry Reform Act, 2025 (NIIRA) was assented to by His Excellency, Bola Ahmed Tinubu, GCFR on the 31st day of July, 2025. It is the principal legislation on insurance business in Nigeria. Following that development, on 12th August, 2025, the National Insurance Commission (NAICOM but subsequently referred to as the Commission) which is the principal regulator of insurance business in Nigeria, issued a policy direction to all insurers and reinsurers in Nigeria, to key into the mandatory recapitalization drive. (See NAICOM Memo with Ref: AICOM/CFI/DCT/NIIRA2025-RECAP/001).

Proactively, the NIIRA ushered in a mega shift in insurance practice, regulation and law. The mega shift was aimed at repositioning the insurance industry in Nigeria to offer sustainable and transparent insurance services to consumers in that sector. The NIIRA contains so many benefits for stakeholders – the insured, the insurer, and the government.  

A major reform in the NIIRA is the stipulation of higher Minimum Capital Requirements (MCR) of ₦10,000,000,000.00 (Ten billion Naira) for life insurance, ₦15,000,000,000.00 (Fifteen billion Naira) for non-life insurance, and ₦25,000,000,000.00 (Twenty-five billion Naira) for composite and reinsurance companies. The second reform is a shift to a Risk-Based Capital (RBC) framework (as against the previous static framework) for insurance and reinsurance companies in Nigeria. Meaning that, a venture into a more or high-risk policy should be matched with corresponding financial safeguard by way of deposit with regulatory body.

A deadline of 12 (twelve) months was given for the affected or interested operators to comply with the directives. That timeline expired on 30th July, 2026. On 2nd August, 2026, NAICOM, in a Press Release, announced that, “Forty-three (43) insurance and reinsurance companies successfully met the prescribed Minimum Capital Requirements. However, Eight (8) insurance companies that submitted evidence of compliance shortly before the statutory deadline are currently undergoing final verification and regulatory review.”

This Paper attempts to give an overview of the NIIRA, as well as enumerate some of the prominent benefits that the regime under the NIIRA promises. For ease of reference, subscripted in-text citation, where necessary, is supplied. The Paper would be of great significance to students offering law of insurance, lecturers in that discipline, insurance practitioners, investors, legal practitioners, relevant regulators,  and the general public. The Paper concludes with some suggested recommendations, which came to the fore, in the course of reviewing the NIIRA.

Overview of the NIIRA

The NIIRA prides as a comprehensive normative framework for the  regulation and supervision of insurance businesses in Nigeria. It has 232 sections, and 2 schedules.

A close look at the NIIRA reveals that, it is a consolidation and a careful adaptation of several enactments that regulated different forms of insurance business in Nigeria. Some of these enactments, which have been repealed by the NIIRA, are:

  1. Insurance Act, Cap. I17, Laws of the Federation of Nigeria, 2004
  2. Marine Insurance Act, Cap. M2, Laws of the Federation of Nigeria, 2004
  3. Motor Vehicles (Third-party Insurance) Act, Cap M22, Laws of the Federation of Nigeria, 2004
  4. National Insurance Corporation of Nigeria Act, Cap. N54, Laws of the Federation of Nigeria, 2004 and
  5. Nigeria Reinsurance Corporation Act, Cap. N131, Laws of the Federation of Nigeria, 2004 – (see Long Title to the Act).

There are several implications for the repeal of the above 5 enactments, one of which is that, insurance business in Nigeria can no longer be conducted under the provisions of those laws. Aside those repealed enactments, there are other enactments and insurance businesses that are allowed to operate parallel with the NIIRA. These include certain agricultural insurance businesses – (section 3(3)(h) of NIIRA), businesses under the National Housing scheme – (section 230(1)(a) of NIIRA, and such other insurance businesses that are not covered under the NIIRA.

Put differently and from the above, for the later categories of insurance businesses (subsisting insurance businesses), the provisions of the laws that govern them are to be read in tandem with the provisions of the NIIRA – (section 230(1)(b)(2)). Where the provisions of existing insurance enactment conflicts with any provisions under the NIIRA, the provision of the NIIRA shall prevail over the affected provisions of such other enactment. Technically, such conflicting provisions in those other laws would, to the extent of such inconsistency, become repealed by the applicable provision of the NIIRA.

Classification of Insurance in Nigeria under NIIRA

Under the NIIRA, there are 2 (two) categories of insurance – life and non-life insurance (section 3 of NIIRA).  Under Life Insurance category, there are only 4 classes of insurance. These classes of life insurance are:

  • Individual life assurance business;
  • Group life assurance business;
  • Annuity; and
  • Health insurance business

Under non-life insurance category, there are 8 classes of insurance businesses. These are:

  • Fire insurance business;
  • General accident insurance business;
  • Motor vehicle insurance business;
  • Marine and aviation insurance business;
  • Energy (oil, gas and power) insurance business;
  • Engineering insurance business;
  • Bonds credit guarantee and suretyship insurance business; and
  • Agricultural insurance business, other than schemes covered by the Nigerian Agricultural Insurance Corporation Act.

From the above, it can be seen that, under the regime of the NIIRA, there are 12 (twelve) express forms of insurance businesses. Interestingly, and in order to make room for informal or small insurance businesses, Section 3(4) of the NIIRA has provided room for what the NIIRA calls “miscellaneous insurance business, including financial inclusion insurance business.” Interestingly, and in order to keep the scope of insurance business fluid, the NIIRA empowers the Commission to publish additional list of classes of insurance business – (section 3(5) of NIIRA).

Insurance Business Terrain

Insurance business in Nigeria is highly regulated. This means that, the sector is an enclosed economic sector. To enter into the sector as an insurance operator, a person or a going concern (corporate, unincorporated or cooperative society, et cetera) must be duly licensed by the Commission. Failure to do so before bearing or using any name such as insurer, insurance broker, insurance agent, et cetera, attracts specified jail terms or/and fine upon conviction – (see PART III, section 10 of NIIRA).

The NIIRA, in its rigid tone, also regulates the composition of the board of insurance companies. In other words, the appointment or/and replacement of principal officers of an insurance company must be done on the approval of the Commission – (section 12 of NIIRA). In is an offence, which attracts such sanctions as the Commission may prescribe, for failure to notify the commission of changes in the management of any insurance company.

Consequent upon the above, and in other to avoid sanction from the Commission, changes, such as reduction or increase in the number of principal officers of an insurance company, must be communicated to the Commission. For instance, events such as death, redundancy, resignation, dismissal, retirement or appointment of principal officer(s) of an insurance company must be communicated to the Commission.

However, the NIIRA did not provide for the timeline within which such change should be communicated to the Commission. This omission may not be an excuse for default. It is hoped that the Commission, by Regulation (which the NIIRA empowers it to make) would provide for timelines for the giving of the notice required under section 12 of the NIIRA.

Whether an insurance cover is for an individual or group life insurance, the specific subject matter of the insurance contract must be disclosed. In a group life cover, an insurance company, offering such service, must generate a Personal identification Number (PIN) for each member in the scheme. In the latter contract (group life insurance) the insurer has within 2 weeks to deliver the PIN to each of the affected member of the scheme.

Persons who may not be Principal Officers in an Insurance Company

The following persons cannot remain or be appointed as manager, director, secretary, or into such other principal position(s) in an insurance company:

  • Person of unsound mind (an insurance company is prohibited from appointing a mad person or an insane person)
  • A person, who by reason of ill health, is incapable of discharging the duties for managerial position in an insurance company
  • Convict of an offence involving dishonesty or fraud
  • A person guilty (adjudged) of serious misconduct in relation to his/her duties
  • Where the person is a professional (e.g. a chartered accountant, chartered administrator, legal practitioner, etc) if he/she has been disqualified by the appropriate competent authority
  • A former director or manager of an insurance company or any financial institution whose licence to operate has been cancelled or whose business has been wound-up due to inability to pay its debt – (section 571(d) and 572 of the Companies and Allied Matters Act, 2020).

Mandatory Capital Base, and the Rule of Minimum Deposit

The NIIRA also provides for capital base; the minimum capital requirement for carrying on the business of insurance in Nigeria. This minimum capital requirement could be in form of government bonds, treasury bill, cash or cash equivalent – (see PART IV). For purposes of the minimum capital requirement, the NIIRA listed 3 categories of insurance business (the third is reinsurance) – life, non-life and reinsurance businesses.

Following the above 3 categories of insurance businesses in Nigeria, their corresponding minimum capital requirements are:

  • Life insurance business: the higher of ₦10,000,000,000.00, or risk-based capital determined by the Commission;
  • Non-life insurance: the higher of ₦15,000,000,000.00 or risk-based capital determined by the Commission; and
  • Reinsurance business: the higher of ₦35,000,000,000.00 or risk-based capital determined by the Commission – (section 15 of NIIRA).

A company that intends to commence an insurance business in Nigeria, depending on the category of insurance business, shall to deposit the equivalent of 50% of the corresponding minimum capital with the Central Bank of Nigeria (CBN). The CBN is authorized to retain that asset until that company is registered as an insurance company. Within 60 days of registration of such company as an insurance company, the CBN is mandated to refund 80% of such deposit in addition to interest – (section 16 of NIIRA). It is the duty of the Commission to notify the CBN of the registration of an insurer, and demand for the CBN to make the mandatory refund to such newly registered insurance company.

Observe that the NIIRA did not disclose the percentage of such interest to be paid by the CBN on the deposit. The NIIRA did not also state whether the interest is on the 50% minimum deport or on the 80% asset that it is to refund.

An existing insurer (an insurance company that survives the recapitalization) is mandated to deposit the equivalent of 10% minimum capital in accordance with the category of insurance business it operates, as prescribed under section 15 of the NIIRA.

Every insurance company has access to the deposit stated above. However, the purpose for accessing such deposit must exclude satisfaction of judgment debt. For any other withdrawal from the deposit, for permitted purposes, such insurance company has within 60 days grace period to replace such withdrawal. Failure to comply with the 60 days window shall form a ground for suspension of business.

However, the NIIRA did not prescribe the limit of withdrawal. It is hoped that the Commission would set a withdrawal limit from the deposit.

Delivery of Policy document

It is mandatory for an insurance company to deliver the policy document to a person who enters into insurance contract as a beneficiary of the insurance services under any of the categories of insurance businesses in Nigeria. Contravention by any insurance company of the above stipulation regarding delivery of policy document attracts stiff sanctions, including 15% of the premium, loss of right to rely on any part of the contract, et cetera.

The NIIRA makes it pretty easy to deliver policy document to the insured. Delivery of policy document could be directly to the insured or through an approved or recommended insurance broker, insurance agent, courier services, email address or such other means agreed by the insurance company and the insured – (section 17 of NIIRA).

Investment of Insurance Funds

Insurance companies are mandated to invest insurance funds under their control in Nigeria. Some of the areas in which an insurance company may invest its funds are:

  • Government bond, bills and other government issued securities
  • Bonds, debentures, redeemable preference shares and other debt instruments issued by corporate entities listed on the Stock Exchange under the Investment and Securities Act subject to regulation of the Commission
  • Ordinary shares of public limited companies listed on a securities exchange registered under the Investment and Securities Act
  • Bank deposits and bank securities
  • Investment certificates of closed-end investment fund or hybrid investment fund listed under the Investment and Securities Act, with good tract records of earnings
  • Units sold by open-end investment funds or specialist open-end investment funds registered under the Investment and Securities Act
  • Real estate development investment, or
  • Specialist investment funds and such other financial instruments as the Commission may approve – (section 27 of NIIRA).
  • Investment of any of the above in foreign countries is permissible.

Statutory Returns and Reports

There is a mandatory requirement for quarterly returns by every insurer. Such returns are to me made within 10 days, after such quarter, to the Commission. In addition to this quarterly return, insurers are mandated to submit annually, an Actuarial Valuation Report (AVR). This requirement further places an obligation on every insurer to appoint statutory actuary – (sections 31 and 32 of NIIRA). These returns and reports are in addition to the audited financial reports, which are to be processed by external auditors approved by the Commission on annual basis – (section 33 of NIIRA).

The NIIRA exempts retirement life annuity from taxation and levies of any form – (section 36 of NIIRA).

Intermediaries

The NIIRA provides for insurance intermediaries – (PART VI of NIIRA). It is mandatory for every insurer to keep accurate records and register of every intermediary that it uses or works with. The following intermediaries are listed under the NIIRA:

  • Insurance agent
  • Insurance broker
  • Reinsurance broker
  • Loss Adjuster

Actuaries

The NIIRA provides for the services of actuaries in the insurance business. Under PART VII of the NIIRA, to perform the role of an actuary under the NIIRA, an entity must be licensed before carrying on as an actuary. Amongst other roles, an actuary appointed by an insurer is to act as a whistle blower and watchdog on behalf of the Commission for the benefits of the policy holders. It is to also assist the insurer in keeping with the demands of the NIIRA to avoid violation of it – (section 56 of NIIRA).

The Basis for Insurance Contract – the Insurance Premium

The basis for any insurance contract is the receipt of the insurance premium, failing which, there is no cover for the anticipated risk – (PART VIII). A person who intends to insure a risk must pay the agreed sum of money – insurance premium – to the insurance company. Therefore, it is when the insurance company has received such premium, that an insurance contract, among other elements of a valid contract, can come into existence.

Payment of the premium could be made differently or through an authorized insurance broker, who has within 20 working days or 30 calendar days to remit the premium to the insurer. There are two exceptions to the foregoing rule: in the area of insurance made statutorily compulsory for the benefit of a third party, and reinsurance, but in all cases, premium loading is prohibited.

The NIIRA gives insurance companies the latitude to frame proposal forms in such as way to elicit every essential or relevant information from the insured. Any omission shall be counted against the insurance company, and such omitted information shall subsequently be treated as non-essential for the given insurance contract. This means that, the insured cannot later be accused of non-disclosure with respect to such omitted information – (PART IX of NIIRA).

It is the requirement of the law that, in preparing a proposal form to be filled by applicant seeking to take up an insurance cover, insurance company should make every question or request clear. On a conspicuous front page of such proposal form, there must be the following mandatory writing: “The Insurance agent who assists an applicant to complete an application or proposal form for insurance shall be deemed to have done so as the agent of the applicant.” – (section 64(3) of NIIRA).

The proposal or application form must demand for the Bank Verification (BVN) and National Identification Number (NIN) of individual applicants, and the relevant Corporate Affairs Commission (CAC) documents for corporate applicant.

Breach of Insurance Contract

Breach of insurance contract that is capable of repudiation by the insurer must fall under the 2 (two) grounds specified by the NIIRA. These grounds are:

  • Fraud, or
  • Fundamental term.

For instance, a breach by the insured of a condition, warranty or such other material term of the insurance contract which a prudent insurer would regard as material and relevant in accepting to underwrite the risk and in fixing the amounts of premium, entitles the insurer to repudiate the contract – (section 65 of NIIRA).

Notwithstanding the above, the NIIRA gives the insurer the liberty to waive such right of repudiation. In such circumstance, and subsequently, an insurer would, by estoppel, be unable to resort to such premise to seek to be absolved from any claim.

It is worthy of note, that, the two grounds by which an insurer may repudiate an insurance contract are not cumulative. One of the two grounds is sufficient to found an action for repudiation of the insurance contract.

Insurable Interest

Insurable interest is a fundamental term of any contract of insurance. An insured cannot validly enter into an insurance contract if the subject matter of the insurance is legally disconnected from the applicant. Subject matter of an insurance includes: life, property or any event. Where it is proved that the applicant does not have any interest in the life, property or event – the subject matter of the policy – such purported contract of insurance becomes void – (section 66 of NIIRA). To determine whether or not there is an insurable interest in a given insurance contract, there is a two-way test provided under the NIIRA. This test is in the positive and negative; existence of derivable benefit from the safety of the life, property or event (on the one hand – positive test) or the person was prejudiced or suffered hurt or disadvantage by the death, loss, injury or destruction of the person or property sought to insure or the loss arising from the occurrence of the event sought to be insured. Claim in any insurance contract is limited to the interest so insured, so that, no claim may exceed the amount of value that the insured has in the subject matter – life, property or event – (section 70 of NIIRA).

Assignment of Interest

The NIIRA permits assignment of interest in a life assurance. However, the assignee’s right is limited to that of the assignor, and no right shall accrue until the assurer is duly notified in writing of the existence of the assignment. Upon receipt of the notice of assignment, the insurance company is under obligation to acknowledge the receipt of the notice – (section 73 of NIIRA). The mode of assignment could be by directly endorsing the assignment on the life assurance policy or by a separate instrument of assignment, e.g. deed of assignment – (section 72 of NIIRA). By section 74 of NIIRA, marine insurance is exempted from the above requirements.

Mandatory Insurance for Employees by their Employers

The NIIRA compels every employer to take a group life assurance for their employees. For public employers, government Ministries, Departments and Agencies (MDAs) are responsible for taking group life assurance for the respective employees in those MDAs. Failure to comply attracts stiff penalty. The minimum of such cover is 3 times the annual total emolument of the employee and the premium shall be paid not later than the date of commencement of the cover – (section 68 of NIIRA). The employer becomes the trustee of the group life assurance, the employee is the life assured, while the beneficiary of that trust is the named beneficiary by the employee. Upon the demise of the employee, the underwriter is under obligation to pay the entitlements of the deceased employee under the group life assurance to his named beneficiary.

Where an employer fails to take a group life cover for any employee, upon the demise of such employee, such employer is under obligation to pay 3 times of the total annual emolument of such deceased employee. It is assumed that the person entitled to this posthumous payment would be the legal presentative of the deceased employee. The NIIRA appears to be silent on this aspect.

The NIIRA provides for a missing employee, for which the preceding requirements, as to posthumous payment, becomes applicable. The presumption of death inures to an employee, within a period of one year, who is adjudged missing by a board of inquiry set upon by the Commission – (section 69 of NIIRA).

Mandatory Insurance for certain Buildings

NIIRA compels every person who constructs a building that is more than one floor to insure the risk that may occur from the building. The time for such insurance is soon after obtaining approval of the building plan but prior to commencement of the building. It is a criminal offence to do otherwise. There is a jail term of 12 months or fine of ₦5,000,000.00 or both.

Also, every public building is to be insured, whether or not it has one floor. The risk to be insured against in the case of a public building include: hazard of collapse, fire, earthquake, storm, flood and such other hazard as the Commission may determine – (sections 75 and 76 of NIIRA).

Under NIIRA, the following are regarded as public building:

  • Tenement house of more than one floor
  • A building occupied by tenants
  • A building occupied by lodgers
  • A building occupied by licensees
  • Building used for school
  • Building used for offering medical services to the public
  • Building used for recreation purposes.
  • Building used for transaction of business

Fire Service Maintenance Fund

The NIIRA created a Fund called “Fire Service maintenance Fund.” Every Insurer of a public building is to pay 0.25% of the net premium received quarterly into the Fund. It is an offence to fail to comply with the above prescribed payment. The NIIRA also subjects both the owner and occupier of such building to criminal liability in the event of failure to comply with the requirement of insuring the building.

The NIIRA empowers an approving authority to demolish any building that it deems to be risky to the public or that does not have adequate or evidence of insurance specified by law. This blanket provision may portend serious danger; as it is capable of manipulation by misuse of state power by politicians against perceived political opponents or critics.

Other mandatory insurance under the NIIRA include the following:

  • All assets and employees of the Federal Government must be insured against any hazard or perils as the Commission may determine – (section 77 of NIIRA).
  • Petroleum and gas filling stations and installations shall be insured against third party losses occasioned by accidental fire outbreak or explosion. It is assumed that petty gas shops would come under this provision, though the NIIRA is silent. These gas distribution/sale outlets pose higher danger than those expressly mentioned. This is because of their proximity to residential buildings, their use of informal sellers or operators, prevalent of use of mobile phones to make payments, etc – (section 78(1) of NIIRA).
  • All vehicles transporting petroleum and gas products must be insured against third party losses. The responsibility to insure petroleum or gas product or vehicles is on the owner of such facility or products, and not on the owner of the vehicle or driver. Operators of filling or gas stations are also under the duty to insure the facilities used by them for the purpose. Insurance certificate must be displayed on conspicuous location in every petroleum/gas station or petroleum/gas loaded-vehicle in transit – (section 78(2) of NIIRA).
  • Professional indemnity by healthcare providers. Medical consultants and other medical service providers are mandated to take an insurance cover from a registered insurance company – (section 80 of NIIRA). Every healthcare provider is to display its insurance certificate in its office. Would this requirement extend to traditional birth attendants (TBA) or/and herbalists? Their services are undeniable in Nigeria. Hence, regulating their vocation, in terms of mandating them to take insurance for their patients may also contribute to reduction in mortality rate from these quarters.
  • Aviation insurance cover by the following: carrier operator, an aerodrome operator, aviation fuel supplier, or a provider of ground landing services, traffic control services, aircraft maintenance services, or provider of other allied aviation as may be specified by the Nigerian Civil Aviation Agency from time to time – (section 81 of NIIRA).

The main beneficiaries of this group of insurance are third parties who may occasion damages within the catchment of the corresponding services. Policy documents that evidence the insurance must be deposited with the Commission within 7 days before commencement of operation.

  • Imported goods into Nigeria must be insured with a registered insurance under the NIIRA – (section 82 of NIIRA).
  • Motor vehicles (third-person) insurance. This is generally covered under PART X of the NIIRA. By section 84 of the NIIRA, it is prohibited to put a motor vehicle on the road for use or to operate or drive or cause to be driven any motor vehicle without a third-party insurance for such vehicle or use. Offenders are liable to imprisonment for 12 months or/and fine of at least ₦250,000.00 upon conviction. Every fare-paying passenger shall be insured by the operator of commuting vehicles against death or bodily injuries. The minimum compensation payable for death of total permanent disability is ₦2,000,000.00 or such higher sum as the Commission may specify in a regulation. An exception to the provision for motor vehicle (third party) insurance is military vehicles and vehicles of foreign State used in diplomatic mission of officials of such foreign State for official duties – (section 86 of NIIRA). The Minister of Defence is liable for third-party risks for vehicles used by the military, while a country without a reciprocal agreement as Nigeria, their respective Diplomatic Mission shall be liable for third-party risks for use of their vehicles in Nigeria.

Claims

An insurer may be compelled to pay to a third-party the judgment sum obtained against an insured – (section 90). An exception to this permission is where the policy was cancelled by mutual consent of the parties to the insurance contract prior to the happening or occurrence of the risk. Another exception is where within 3 months to such proceeding leading to the judgment, an insurer has sought for and obtained a declaration to avoid such payment.

Road Accident Victims Compensation Fund (RAVCF)

Another Fund that the NIIRA established is the Road Accident Victims Compensation Fund (RAVCF) – (section 99 of NIIRA). Quarterly, every underwriter is to pay 0.5% profit on motor insurance business into this Fund. The Fund is to be managed by a committee called Road Safety Accident Victims Compensation Committee – (section 100 of NIIRA). The Fund is to cater for certain logistics in the Federal Road Safety Corps, the Nigeria Police Force, such other road traffic agencies. 10% from the Fund is to be paid severally to the above three entities as grant for procurement of equipment. 65% of money in the Fund is to be paid by the Commission into a separate Fund for settling compensations, while the remaining 5% from the Fund is for administering the RAVCF. This percentage is subject to review, every 5 years interval, by the Minister on the recommendation of the Commission.

Interestingly, the 65% compensation is payable to victims of motor accident accruing from uninsured motor vehicles or an unidentified driver, and expenses incurred by any hospital that treats such victim of motor accident, so long as the expenses of such hospital does not exceed ₦2,000,000.

PART XI of the NIIRA deals with ECOWAS BROWN CARD Scheme. Section 103 established a National Bureau on the ECOWAS Brown Card Scheme. The Bureau is to give effect to Article 5 of the Protocol on the ECOWAS Brown Card Scheme. The Scheme is a juristic person.

PART XII of the NIIRA deals with acquisition, amalgamation and transfers. It deals with coming together of two or more insurers for purposes of doing insurance business in Nigeria. It also regulates transfers of insurance business or for the reconstruction of insurance business, as well as outsourcing of management of insurance companies.

Winding-up

PART XIII of the NIIRA deals with winding-up of insurance companies. Where the licence of an insurance operator other than a body corporate (being wound-up by the court) is cancelled. The Commission is empowered to appoint a receiver to manage the assets or going concerns of such operator for the benefits of policyholders, clients or creditors. In such a circumstance, the Commission may appoint a provisional liquidator instead of a receiver – (section 110 of NIIRA).

50 policyholders who have been insured for at least 3 years may apply to the Court for winding-up of an insurer on the ground of inability to pay its debts – (ee sections 571 and 572 of the Companies and Allied Matters Act, 2020). It is prohibited for a life assurer to seek to wind-up voluntarily unless for purposes of amalgamation, transfer or acquisition – (sections 111 and 112 of NIIRA). Section 114 of NIIRA protects policy funds from garnishee and other adverse claims by creditors of the insurer.

Marine Insurance

PART XIV deals with marine Insurance. Under section 115, marine insurance is defined as a contract of the utmost good faith whereby the insurer undertakes to indemnify the assured, in the manner and to the extent agreed, against marine loss; that is, losses incidental to marine adventure. The term of a marine insurance may extend the cover to risk on inland waters or any land risk which may be incidental to any sea voyage –(section 116 of NIIRA).

TheNIIRA prohibits marine insurance for the purpose of wagering or gaming. However, any lawful marine peril may be a subject of marine insurance. Marine insurance is deemed concluded or created upon the acceptance by the insurer of the proposal of the insured. It is immaterial if at the moment, the policy has been issued so soon or the policy is yet to be issued, but not that it will not be issued at all.

To show that the proposal has been accepted, reference may be made to the slip or covering note or other customary memorandum of the contract – (section 140 of NIIRA). Every marine contract must be embodied in the marine policy in accordance with the form in the First Schedule to the NIIRA or to the like effect – (section 141 of NIIRA).

Further, an insurer in a marine insurance, who, by the first contract, has an insurable interest, may reinsure that interest. The assured in the first marine insurance, for which the insurer enters into reinsurance contract, shall not be entitled to any benefit from the reinsurance – (section 123 of NIIRA).

The NIIRA also highlighted persons capable of having insurable interest in marine insurance. Some of these persons with insurable interest in a marine insurance include:

  • persons interested in marine adventure
  • a person with indefeasible interest
  • a person with contingent interest
  • buyer of goods who have insured the goods for carriage by sea
  • a person with a partial interest of any nature
  • an insurer in a marine insurance contract
  • a money lender on bottomry or respondentia
  • master of a ship
  • any member of the crew in a ship has insurable interest in respect of his wages
  • a person advancing a freight where the freight is not payable in case of loss
  • the assured that creates a charge has interest in that charge
  • mortgagor has interest in the full value
  • mortgagee has interest in respect of the sum due or to become due in the mortgage
  • owner of the insurable property

Full Disclosure in Insurance Contract

There must be full disclosure by the insured to the insurer of the existence of fair risk. Misinformation or misrepresentation is capable of leading to repudiation of the contract – (section 132 of NIIRA). In the absence of request for disclosure, an insured may not disclose a circumstance if –

  • it diminishes the risk
  • the insurer knows of it
  • the insurer ought to know of it
  • the insurer is presumed to know of it or
  • it is something as to which the insurer waives the information.

The foregoing window calls for due diligence by every insurer, both in preparing the proposal or application form, and physical investigation/inspection of the subject matter of the intended insurance contract. Section 137 of NIIRA provides for remedies for breach of the duty of fair disclose, while section 138 re-enforces the element of utmost good faith in every insurance contract, of which no law or agreement by parties can remove that element from insurance contract.

Representation is very essential in contract of insurance. It is part of the contract, as it is capable of enabling the insurer to fix the premium or to agree or reject to undertake the risk involved – (section 139 of NIIRA).

Section 146 of NIIRA deals with double insurance. That is, where the sum insured exceeds the indemnity allowed by the NIIRA, the insured is said to be over-insured by double insurance.

Section 147 abolishes any rule of law that allows discharge due to breach of warranty. In other words, an insurer cannot assert that the breach of a warranty by an insured entitles the insurer to avoid liability under the insurance contract. However, the liability of an insurer is only limited to and arises if no step is taken to remedy any loss occasioned by the breach of a warranty. Warranty in a marine insurance may cover the ship as well as the goods in it – (sections 152 and 153 of NIIRA).

Certain changes in the course of a ship will prevent the risk to attach; the insurer is discharged of liability in such contract. This also applies to deviation of course of a ship contrary to the route specified by the policy, unless for a lawful reason. In other words, the port of departure and the port of destination expressly specified by the policy are fundamental terms of a marine insurance – (sections 156, 156, 157, 158 and 159 of NIIRA). Some of these changes include:

  • Change in port of departure
  • Change is port of arrival
  • Change of voyage          

A ship is under obligation to follow the specified route, as well as stop at several ports of discharge as specified until it gets to the destinations specified by the policy – (section 160 of NIIRA). Time is of essence in a voyage policy. Delay in voyage can be a ground for discharge from liability by an insurer unless there is a cogent lawful reason for such delay – (section 161 of NIIRA).

Losses in marine insurance include total loss, actual loss, partial loss, missing ship, et cetera – (sections 167, 168, and 169 of NIIRA) as well as constructive total loss – (section 171 of NIIRA), general average loss – (section 177 of NIIRA), and successive losses – (section 188 of NIIRA). The NIIRA permits an insured to abandon the subject matter of the insurance to the insurer, in which case a notice of abandonment must be sent by the insured to the insurer, otherwise the risk will be regarded as partial loss – (section 173).

An insured that under-insures a subject matter is deemed to be an insurer for the remaining value of the subject matter. Also, the premium is refundable where, in the absence of fraud and illegality by the insured or his agents, there is failure of the subject matter of the policy – (sections 191 and 194 of NIIRA).

Insurance Institution

Section 200 of NIIRA provides for operating insurance institution, takaful or micro-insurance business, web, internet or electronic insurance but only upon obtaining licence from the Commission. All insurance institutions must adopt the provisions of the law relating to Know Your Customer (KYC), Anti-Money Laundering (AML), Combating Financing of Terrorism (CFT) and Combatting Proliferation of Weapon of Mass Destruction (CPF) – (section 202 of NIIRA).

It is required under NIIRA that containers that transport goods from one port in Nigeria to another destination within Nigeria should be insured – (section 203 of NIIRA). Foreign insurance and reinsurance are highly regulated, especially for subject matters regard by the NIIRA as domestic insurance or reinsurance business – (section 204 of NIIRA).

Section 205 of NIRIA recognizes the exception to the doctrine of privity of contract. It makes a third-party to claim in an insurance contract made to be third-party insurance.

In other to stem out fraud and corruption in the insurance industry, the NIIRA places duty on every insurance operator to set up internal mechanisms to protect its financial reporting and security of its assets, as well as to report instances of fraud – (sections 206 and 207 of NIIRA).

Claims are to be settled within specified timeline unless in the event of denial of liability – (section 210 of NIIRA). Where, after making claim but the insurer refuses or fails to pay, the insured may request the Commission to pay from the statutory deposit of the insurer. The timeline for settlement of all admitted claims is within 60 days of notification.

Court with Jurisdiction

The court that has jurisdiction over insurance matter is the Federal High Court or a tribunal set up under the repealed National Insurance Commission Act – (sections 210(9) and 224 of NIIRA). The NIIRA also restricts insurance companies of granting loan to non-executive directors in their companies. However, there are few exceptions.

Service of court processes on any insurance operator is to be effected at the registered or licensed office. In a circumstance where the said office ceases to exist in Nigeria, such process may be served at the Commission’s office – (section 217 of NIIRA).

Section 221 of NIRIA gives the Commission the right to compound offences under NIIRA. However, this right is subject to the constitutional powers of the Attorney-General of the Federation to prosecute, takeover or discontinue prosecution of crimes. In lieu of prosecution of an offender, the Commission may impose a fine of at least ₦250,000.00. If the offence is shown to have been committed by a body corporate, then every officer who was directly involved is deemed to be personally culpable – (section 223 of NIIRA).

Insurance Policyholder Protection Fund

The third Fund established under NIIRA is the Insurance Policyholder Protection Fund – (section 212 of NIIRA). The Fund is for use to resolve issues bordering on distress and insolvencies of licensed insurers. Section 215 provides for the right of subrogate by the insurer.

Section 216 of NIIRA provides for human resource training for special risk business. Every insurer or reinsurer underwriting special risk business is mandated to set aside sum of money for training of its staff for such special risk business.

Section 228 empowers the Commission to make regulations for the purpose of giving full effect to the provisions of NIIRA. Section 229 contains the various enactments that were repealed by NIIRA. Section 231 contains the interpretation, and the last section is section 232 – citation. The NIIRA is cited as the Nigerian Insurance Industry Act, 2025.

There are two Schedules to the NIIRA- the First Schedule is the Form of Policy (sections 141(1) and 199 (1) of NIIRA). The Second Schedule is Rules for Construction of Policy (section 9(1) and 141(2) of NIIRA).

Benefits of the NIIRA

The following are some of the benefits of the NIIRA:

  • Unification of the pieces of insurance legislations in Nigeria into a bundle of enactment, for ease of reference and comprehension
  • Creating a clear legal framework for government, scholars, insurance operators and the public to understand the scope and essence of insurance business in Nigeria
  • Re-capitalization of the insurance subsector of the macro economy
  • Streamlining the number of insurers by creating room for amalgamation of two or more insurers, strengthening existing insurers
  • Eradication of corruption and opacity that characterized insurance business under the previous era
  • Creating a viable and sustainable legal framework for insurance business to grow, and possibly catch-up with its banking counterpart
  • Creating another economic strand by which the nation’s gross domestic product (GDP) may be attained
  • Creating employment opportunities for Nigerians
  • Creating conducive, attractive and incentivized insurance business for foreign direct investment (FDI)
  • Creating easy and clear legal framework for ensuring speedy insurance claims and recovery.

Conclusion

The NIIRA is a great improvement and positive stride toward a sustainable insurance business in Nigeria. However, the following observations and suggestions are worthy of consideration:

  1. NIIRA did not disclose the percentage of interest or whether the interest payable by the CBN to a newly licensed insurer is on the 50% deposit or 80% payable. There is the need to provide clarity on that aspect.
  2. NIIRA did not prescribe the limit of withdrawal from the statutory deposit. It is not sufficient to give the timeline for replacement of such withdrawal. There is the need to set a withdrawal limit from the deposit.
  3. It is assumed that the person entitled to a posthumous payment from a group life assurance is the legal representative of the deceased employee. The NIIRA appears to be silent on this aspect. There should be clarity on that aspect.
  4. It is also assumed that petty gas shops would come under the same provision that mandates owners or operators of petroleum or gas stations to take insurance. NIIRA is silent on this aspect. It is becoming a thing of concern, that gas distribution/sale outlets and retailers pose great or higher danger than those expressly mentioned under NIIRA. This is because of their proximity to residential buildings, their use of informal sellers or operators, prevalent use of mobile phones to make payments in those outlets, et cetera.
  5. There should be timeline for giving of notice of abandonment by the insured to the insurer. In a doubtful situation in which the insured is entitled to inquiry into the loss, there should also be a timeline within which to carry out such inquiry, as well as when to notify the insurer of the abandonment.
  6. The NIIRA only mandates medical service providers to take insurance, but seems to be silent on Traditional Birth Attendants (TBA) and Herbalist/Native Doctors. Could it be assumed that TBA or/and herbalists are contemplated as medical service providers? Their services are undeniable in Nigeria. Hence, regulating their vocation, in terms of mandating them to take insurance for their patients may also contribute to reduction in mortality rate from these quarters.
  7. Other professionals, such as legal practitioners, engineers, auto mechanics, technicians of any vocation, et cetera, should come under some sorts of third-party insurance regime to protect consumers of their services from risk of professional negligence or recklessness. This measure will discourage quackery in those professions as well as reduce the rate and degree of losses suffered by clients, customers or consumers who retain the services of these professionals/technicians.

Triumph Paul Atteh, Esq, LLM, Notary Public