Joy Agwunobi
Nigeria’s newly assented Nigerian Insurance Industry Reform Act (NIIRA) has introduced sweeping compliance measures across the insurance sector, making it mandatory for all petroleum and gas refilling stations, as well as vehicles transporting these products, to be insured against third-party losses resulting from accidental fires, explosions, or other high-risk incidents.
The law, signed recently by the president and published by the National Insurance Commission (NAICOM), stipulates that offenders face a minimum penalty of two years’ imprisonment, a fine of ₦1 million, or both.
The provisions, captured under Section 78 of the NIIRA, place the responsibility for this cover squarely on the owners of petroleum and gas products in transit or operators of refilling stations.
In addition, operators are required to display a valid certificate of insurance in a visible location at the station premises or include it among the transit documents for petroleum and gas products. Failure to comply attracts the stipulated fines and jail terms.
“A copy of certificate of insurance that meets the minimum requirement shall be displayed in a conspicuous location at the refilling station or included in the documents covering the petroleum and gas products in transit as the case may be,” the Act stated.
Tougher penalties for public building insurance non-compliance
The Act also strengthens provisions for compulsory insurance on public buildings, raising penalties for defaulting owners and occupiers. Under Section 76, the fine has been increased from ₦100,000 to at least ₦1 million, with an alternative or additional penalty of up to 12 months’ imprisonment.
Public buildings — including multi-storey residential tenements, hostels, commercial premises, hospitals, schools, and recreational facilities — must be insured against hazards such as collapse, fire, earthquake, storms, and floods. The policy must cover legal liabilities for loss or damage to property, bodily injury, or death suffered by occupants and third parties.
“All public buildings must be insured against various hazards to ensure safety and liability coverage. Insurance is mandatory for public buildings against collapse, fire, earthquake, storm, flood and other hazards as determined by the Commission,” NIIRA stated.
Insurers who fail to remit payments as required under this section face penalties of up to 10 times the payable amount, with persistent non-compliance providing grounds for licence cancellation.
“ An insurer who defaults in making payment as required under subsection (2) of this section is liable to a penalty of a fine of not more than 10 times the amount payable, provided that persistence in non-compliance with the provision shall be a ground for the cancellation of registration of an insurer,” the legislation added.
Construction risk insurance now compulsory for multi-storey buildings
NIIRA further prohibits the construction of any building exceeding one floor without insurance cover for construction risks. Section 75 mandates owners or contractors to procure liability insurance before commencing work, covering negligence that could lead to injury or death of workers or the public.
“A person shall not construct or cause to be constructed any building of more than 1 floor (British building standard) without insuring his liability in respect of the construction risks that may be caused by his negligence or the negligence of his servants, agents, consultants or public authority which may result in bodily injury or loss of life to any person or workman working on the site or to any member of the public,” the Act states.
It added that the owner or contractor must procure insurance immediately upon approval of the building plan before commencing construction.
Violations attract a fine of ₦5 million, imprisonment of up to 12 months, or both.
Licence cancellation for defaulting insurers
The law also introduces stringent measures against insurers who default on claim payments. Section 8(1)(m) provides that NAICOM may cancel the licence of any insurer with at least five verified complaints of delayed claims settlement.
Other grounds for licence cancellation include failure to maintain special reserves, meet capital or solvency requirements, or comply with regulatory directives.
Mandatory appointment and accountability of actuaries
Under Section 54, all insurers must appoint a qualified actuary. Failure to do so empowers NAICOM to appoint one on behalf of the insurer. The Act specifies that actuaries have a duty to report any issue that could lead to regulatory contraventions or adversely affect policyholders.
If an insurer fails to act on an actuary’s report within the specified time, the actuary must escalate the matter to NAICOM. Termination of an actuary’s appointment must also be immediately reported to the Commission, along with the circumstances of termination.
Actuaries acting in good faith are granted immunity from legal or disciplinary proceedings, while those who fail to comply with these provisions risk fines of ₦1 million or imprisonment of up to six months.
Strict rules on premium payments
Section 60 reinforces that no insurance cover is valid without advance premium payment. Any insurer granting cover without receiving the premium will face penalties of up to twice the amount collected or other sanctions prescribed by NAICOM.
The law also tightens the timeline for brokers to remit premiums to insurers. Under Section 61, brokers must pay premiums within 20 working days or 30 calendar days whichever is later from receipt or the effective date of cover.
Brokers who breach this provision will be required to pay the net premium with interest at 2 percent above the Central Bank of Nigeria’s Minimum Rediscount Rate, along with a penalty of ₦500,000 or twice the value of the commission earned, whichever is higher.
“A broker who contravenes the provisions of subsection (1) of this section is liable to pay the net premium due to the insurer with interest at 2 percent above the Central Bank of Nigeria Minimum Rediscount Rate from the date of the breach; and a penalty in the sum of ₦500,000.00 or two times the value of the commission earned, whichever is higher,” it added.
By expanding mandatory insurance requirements, increasing penalties, and strengthening enforcement mechanisms, NIIRA 2025 signals the federal government’s intention to overhaul Nigeria’s insurance industry framework.
For high-risk sectors such as petroleum, gas, construction, and public building operations, the Act sets a new compliance bar — one backed by criminal penalties, substantial fines, and the threat of licence revocation for erring insurers.
The reform is expected to enhance public safety, protect third-party interests, and deepen insurance penetration, while reinforcing NAICOM’s regulatory oversight across all tiers of the industry.
