Nigeria’s insurance sector is set for sweeping reforms following the enactment of the Insurance Industry Reform Act (NIIRA) 2025, which raises capital requirements, shortens claim settlement periods, and restructures how aviation risks are underwritten.
Under the new law, non-life insurers — including those underwriting aviation — must increase their minimum capital base from ₦3 billion to ₦15 billion. The Act also mandates that at least 20 per cent of aviation risks be retained locally, while up to 70 per cent may be reinsured abroad.
To better protect policyholders, the Act slashes the maximum claims settlement period from 90 days to 60 days, with aviation insurance potentially seeing payouts within 45 days. It also establishes an Insurance Policyholders Protection Fund, designed to guarantee claims even if an insurance company becomes insolvent.
The reforms took center stage at the 5th CHINET Aviacargo Conference in Lagos, where industry leaders dissected their impact on the aviation sector.
Fewer but Stronger Insurers
According to Kunle Ahmed, Managing Director of AXA Mansard Insurance and Chairman of the Nigerian Insurers Association (NIA), the tougher capital threshold means only financially robust insurers will remain in the aviation space. Currently, only about 40 per cent of Nigerian insurers actively underwrite aviation due to its high costs.
“The bigger the capital of a company, the greater its capacity to retain risks locally,” Ahmed said, stressing that the reform could reduce reliance on foreign reinsurers. He cited a past case where Nigerian insurers promptly paid their share of a claim while it took five years to recover the balance from the international market.
Domestication and Compliance
The Deputy Commissioner (Technical) of NAICOM, Usman Jankara, who represented the Insurance Commissioner, Olusegun Omosehin, said NIIRA enforces domestication provisions requiring all aviation assets in Nigeria to be insured with licensed local companies before any portion can be ceded abroad.
He added that airlines, cargo handlers, and service providers must now submit valid insurance policies to NAICOM seven days before commencing operations, as stipulated under Section 81 of the Act.
To reassure foreign lessors and financiers, NAICOM agreed to a cut-through clause, allowing direct access to payouts from foreign reinsurers if a Nigerian insurer becomes insolvent. This, Jankara explained, aligns Nigeria with global best practices.
Faster Claims, Greater Confidence
Jankara also highlighted the introduction of the Insurance Policyholders Protection Fund, which ensures that claims are settled even if insurers default. He noted that NAICOM may reduce settlement timelines for aviation claims to 45 days, further boosting passenger and operator confidence.
“There is no country in the world that allows businesses that generate employment to be moved elsewhere,” he said. “By enforcing domestication, we are ensuring that Nigeria retains value while protecting the interests of operators and passengers.”
With NIIRA 2025, experts say the landscape for aviation insurance in Nigeria will consolidate — leaving fewer but stronger players — while ensuring faster claims processing and greater financial security for the sector.
