The Nigeria Insurance Industry Reform Act, 2025
Introduction
In August 2025, President Bola Ahmed Tinubu assented to the Nigeria Insurance Industry Reform Act, 2024 (NIIRA), ushering in a new legal framework that consolidates and repeals multiple legacy statutes. The Act strengthens solvency requirements, expands compulsory insurance classes, modernises regulation, and clarifies the investment powers of insurers. It also introduces robust enforcement provisions and mandates insurance coverage for high-risk sectors.
This article examines some of the Act’s key provisions, with a particular focus on compulsory insurance for buildings, petroleum and gas facilities, and government assets. It also outlines regulatory implications, market impact, and practical steps stakeholders should take during the transition period.
Background and Policy Objectives
The NIIRA repeals and replaces the Insurance Act, the Marine Insurance Act, the Motor Vehicles (Third Party Insurance) Act, and various laws governing public insurance corporations. Its objectives include:
a) Strengthening solvency and capital adequacy standards
b) Expanding compulsory insurance to high-risk and public-interest sectors
c) Enhancing enforcement and compliance mechanisms
d) Promoting targeted use of insurance proceeds for asset restoration
e) Enabling insurers to play a more active role in national infrastructure development
f) Aligning Nigeria’s insurance industry with global best practices in governance and digitisation
The reforms align with the Federal Government’s broader goal of deepening financial markets, attracting capital, and raising insurance penetration levels in Nigeria.
Some Key Reforms
- Compulsory Insurance for Buildings Under Construction
The Act mandates that builders’ liability insurance must be in place before construction begins. This policy must cover third-party injury, death, and property damage, including structural collapse. Building control authorities are legally prohibited from issuing permits without evidence of this cover.
- Compulsory Insurance for Public Buildings
Owners or occupiers of public-access buildings such as shopping malls, schools, hotels, and office complexes are required to maintain insurance against collapse, fire, floods, earthquakes, and storms.
- Petroleum and Gas Facilities
Operators of petrol stations, gas plants, and similar high-risk facilities must maintain adequate insurance. This protects operators, landlords, and surrounding communities in the event of industrial accidents.
- Enforcement: Seal-Up Powers and Criminal Penalties
Regulators, working with NAICOM, may seal non-compliant public buildings. Offenders face significant fines and prison terms of at least three years.
- Mandatory Use of Fire Insurance Proceeds
Where a property is damaged by fire, the Act requires that insurance proceeds be applied directly to rebuilding or restoring the structure. Lump-sum cash payouts for other purposes are not permitted, preserving asset value and ensuring recovery.
- Government Asset Insurance
For the first time, ministries, departments, and agencies are legally required to insure their properties and assets, embedding risk management into public sector asset governance.
- Insurers’ Investment in Real Estate Development
Subject to NAICOM approval, insurers can now invest directly in real estate projects. This opens new funding channels for developers and supports long-term capital formation in infrastructure.
- Precedence over Conflicting Housing Fund Laws
Where the NIIRA conflicts with the National Housing Fund Act or other housing-related statutes, the NIIRA takes precedence. This provides legal certainty for compliance planning.
Some Regulatory and Market Implications
Developers and Construction Firms: Insurance compliance becomes a gating requirement for project approvals. Early engagement with insurers will be essential to avoid delays.
Government Agencies: Budgeting for insurance premiums will now form part of annual fiscal planning. Non-compliance could result in reputational and operational risk.
Insurers: Expanded compulsory insurance classes create premium growth opportunities, particularly in construction, energy, and public infrastructure.
Corporate Buyers and Public Institutions: Clearer standards and enforceable penalties create stronger incentives for timely claims processing and policy compliance.
Potential Challenges
Transitional Compliance: Builders and public facility owners will need immediate guidance on how to integrate insurance procurement into project timelines.
Regulatory Capacity: Effective enforcement will require coordination between NAICOM, building control agencies, and state regulators.
Market Response: The new investment powers for insurers may increase competition for high-quality real estate projects, but will require stringent due diligence frameworks.
Next Steps for Industry Players
- Developers: Integrate compulsory insurance procurement into project planning and budget approval stages.
- Government Entities: Conduct an asset audit to determine the scope of insurance requirements under the Act.
- Insurers: Review product offerings to capture new compulsory insurance markets; seek NAICOM guidance on real estate investment approvals.
- Energy Sector Operators: Review and update liability coverage for petroleum and gas facilities in line with the Act.
Conclusion
The Nigeria Insurance Industry Reform Act 2025 is a structural reset that expands compulsory coverage, strengthens enforcement, and integrates insurance into Nigeria’s infrastructure and asset management strategy. By mandating coverage for public buildings, construction projects, and energy facilities, and by empowering insurers to invest in real estate, the Act reshapes the relationship between insurance and economic development.
For insurers, developers, government agencies, and corporate buyers, compliance is both a legal necessity and a strategic advantage in a market where regulatory enforcement is set to become significantly more robust.