Overview of the Nigerian Insurance Industry Reform Act
President Bola Tinubu recently signed the Nigerian Insurance Industry Reform Act (NIIRA), marking a significant development in the insurance sector. This law is designed to align the industry with Nigeria’s broader economic goals, including its target of achieving a $1 trillion economy. The reform introduces several changes that are expected to impact both individuals and businesses across the country.
Expansion of Compulsory Insurance
One of the key aspects of the NIIRA is the expansion of compulsory insurance. Previously, certain types of insurance were mandatory, but the new law has added more categories. These include construction risk insurance for multi-storey buildings, third-party property damage cover for petroleum and gas stations, and insurance for public buildings against risks such as fire, collapse, and flood.
Part IX of the law outlines the specific requirements for compulsory insurance and the penalties for non-compliance. For instance, Section 75(1) states that the construction of a building with more than one floor must not proceed without the owner obtaining insurance to cover risks arising from their negligence or that of their servants, agents, consultants, or public authorities. Failure to comply could result in a fine of N5,000,000 or imprisonment for up to 12 months, or both.
Insurance for Public Buildings
Section 76 of the law mandates insurance coverage for public buildings against various risks, including collapse, fire, earthquake, storm, and flood. It also defines public buildings as those that are accessible to the public for educational, medical, or recreational purposes. Additionally, the law requires that insurers contribute 0.25% of their net premiums quarterly to a Fire Services Maintenance Fund, which supports firefighting institutions.
Penalties for Non-Compliance
Non-compliance with these provisions can lead to severe consequences. Insurers who fail to make the required payments may face penalties of up to 10 times the amount due, and persistent violations could result in the cancellation of their registration. Similarly, owners or occupiers of premises who violate the law may be fined at least N1 million or jailed for 12 months, or both.
Enhanced Enforcement Powers
A notable provision of the law is the authority granted to the National Insurance Commission (NAICOM) to demand that authorities seal any building posing a serious risk to the public if no valid insurance cover is in place. This measure aims to ensure that all buildings meet safety standards and are adequately insured.
Specific Insurance Requirements
The law also includes specific requirements for different sectors. For example, Section 78 mandates that all petroleum and gas refilling stations and installations must be insured against third-party losses caused by accidental fires or explosions. Vehicles transporting these products must also have similar coverage. A certificate of insurance must be displayed at the station or included in the transport documents.
Failure to comply with these requirements can result in a fine of N1 million or two years in prison, or both.
Healthcare and Aviation Sectors
In the healthcare sector, Section 80 requires healthcare providers to maintain professional indemnity insurance and display the certificate in their offices. Similarly, the aviation industry is subject to stringent requirements, with carriers, aerodrome operators, and other service providers mandated to maintain adequate insurance covering their liabilities.
Motor Insurance and Credit Life Insurance
Section 6 of the law focuses on third-party motor insurance, requiring all fee-paying passengers to be insured against death or bodily injury. Additionally, Section 91(3) mandates credit life insurance for borrowers taking out loans exceeding N10 million. This insurance covers the remaining balance of the loan if the borrower dies or becomes permanently disabled.
Government Assets and Employees
The law also extends to government assets and employees, requiring them to be insured against various hazards. This provision ensures that public resources are protected and that government staff are covered in case of accidents.
Regional Impact
One of the most significant regional impacts of the NIIRA is the commitment to the ECOWAS Brown Card Insurance Scheme. This initiative provides standardized cross-border coverage for accident victims, enhancing regional cooperation and ensuring that individuals receive appropriate insurance benefits when traveling within the Economic Community of West African States (ECOWAS).
Industry Response and Future Outlook
Industry experts and investment firms like United Capital have welcomed the reforms, highlighting their potential to bring more order to the insurance sector and support Nigeria’s economic growth. They emphasize that the expanded scope of compulsory insurance will lead to increased coverage and a more stable premium market.
With the implementation of the NIIRA, analysts predict that insurance will become an essential part of daily life for many Nigerians, driving greater penetration and fostering a more robust and sustainable insurance market.
