Cross-Border Insurance in Nigeria

6/13/24, 1:55 PM (17) Cross-border Insurance in Nigeria: A Legal Impossibility?
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Cross-border Insurance in Nigeria: A

Legal Impossibility?
Chidi Odoemenam
Commercial Lawyer | Senior Associate at Rendeavour,
Alaro City
February 19, 2018
A business-friendly regulatory environment for the Nigerian insurance sector

will undoubtedly entice established foreign insurance companies to focus on
doing insurance business in Nigeria. However, proper supervision of cross-
border insurance is required to ensure a maintenance of organization in the
mode of doing insurance business in Nigeria.
What is Insurance? Insurance is a contract, represented by a policy, in

which an individual or entity receives financial protection or
reimbursement against losses from an insurance company. Insurance
policies are used to hedge against the risk of financial losses that may
result from damage to the insured/insured property or from third party
damage or injury.
Insurance serves a number of important economic functions that are

largely distinct from other financial institutions. Importantly, the availability
of insurance enables risk averse individuals, entrepreneurs and corporates
to undertake higher risk that they would not ordinarily undertake in the
absence of insurance, promoting higher productivity and growth. The
“income smoothing” effect of insurance helps the insured to avoid
excessive and costly bankruptcies and facilitates lending to businesses.
Regulation of Insurance business in Nigeria
Insurance business in Nigeria is primarily regulated by the Insurance Act

(CAP LI18, LFN 2004) and other rules and regulations made pursuant to
the Insurance Act. The Nigerian National Insurance Commission (NAICOM)
was established in 1997 to act as the government agency primarily
responsible for overseeing licensing and general regulation of insurance
business in Nigeria. The NAICOM maintains its head office in the Federal
Capital Territory, Abuja, but maintains branch offices in Kano, Port-
Harcourt, Lagos and Enugu.
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Prior incorporation with the Nigerian Companies House (the Corporate
Affairs Commission) and registration with the NAICOM is a compulsory
prerequisite for carrying on insurance business in Nigeria.
Intending insurance companies are required to submit requisite

documents to the NAICOM and obtain an (I) Approval-in-Principle and (ii)
final approval before commencing insurance business in Nigeria. The
NAICOM-required paid-up capital for insurance companies in Nigeria is (i)
general insurance business - ₦3 Billion; (ii) life insurance - ₦2 Billion; and
(iii) ₦10 Billion for reinsurance business. Intending insurers are required to
deposit the equivalent of 50% of the paid-up share capital with the
Nigerian Central Bank. Upon registration as an insurer, 80 percent of the
statutory deposit would be returned with interest not later than 60 days
after registration.
Cross-border Insurance in Nigeria
It is important to note that there is no provision of Nigerian law

prohibiting cross-border insurance. Thus, it can be argued that a foreign
insurance company can provide insurance services to a Nigerian insurance
customer.
This position is further strengthened by the fact that Nigerian law does not
have extra-territorial powers and would not be able to regulate non-
Nigerian companies carrying on business outside the shores of Nigeria.
However, the Insurance Act indirectly regulates cross-border insurance

business carried on in Nigeria. The relevant sections of the Insurance Act
specifically provides that “no person shall transact an insurance or
reinsurance business with a foreign insurer-reinsurer in respect of any
life, asset, interest or other properties in Nigerian businesses classified as
domestic insurance unless a company registered under the Insurance Act”
Domestic insurance or reinsurance under the Insurance Act is stated to

include fire, motor, liability, life, accident, oil and gas, marine, and aviation
insurance and reinsurance.
Key takeaways from the above mentioned section are:
1. The restriction on cross-border insurance applies to “life, asset, interest or

properties in Nigeria”.
2. The restriction is not limited to the insurance businesses listed as “domestic
insurance or reinsurance” as the section uses the word “includes” which
suggests that a non-limitation to the listed businesses.
3. The obligation is upon persons seeking to insure their “life, asset, interest or
properties in Nigeria”.
However, if the Nigerian insurance customer satisfies NAICOM that by

reason of exceptional nature of the risk in or emanating from Nigeria or
any other exceptional circumstances, such risk cannot be placed with a
Nigerian registered insurer or reinsurer, the NAICOM may in writing permit
such customer to place the risk with a foreign insurer.
Also, the Nigeria Oil and Gas Industry Content Act, 2010 (the Local
Content Act) which provides for the development of Nigerian content in
the oil and gas industry provides that no insurance risk in Nigerian oil and
gas sector shall be placed offshore without the written approval of the
NAICOM which shall ensure that Nigerian local capacity has been fully
exhausted.
The NAICOM Market Conduct and Business Practice Guidelines, 2015

extensively provides for the mode and procedures for obtaining NAICOM
waiver in relation to foreign insurance/reinsurance of Nigerian risk.
Conclusion
The legal impossibility of cross-border insurance in Nigeria is a product of

indirect regulation by virtue of the Insurance Act and Local Content Act.
While the foreign insurer is not expressly prohibited from providing cross-
border insurance services to Nigerian customers, its prospective Nigerian
customers are banned from patronizing foreign insurers in respect of
Nigerian risk (subject to the “exceptional risk” caveat).
Whilst the evident intention of the Insurance Act and Local Content Act is
to encourage local insurance companies in Nigeria, the restriction may
also have the effect of discouraging cross-border trade liberation efforts.
Chidi Odoemenam is a lawyer at Aluko & Oyebode. His areas of practice

include Insurance, Capital Markets, Mergers & Acquisitions, Tax and Private
Equity.
Comments
Chizitereihe Oti and 22 others · 6 comments

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Most relevant
Fabian Ohore • 1st 5y

Regional-Executive Consultant at Executive Strategies Group LLC
Chidi
excellent insights. Quick question is it possible for Nigerians in nigeria based
on your analysis to purchase Life insurance policies from American and
European life insurers
Many carriers over here actually market services to foreign nationals. …see more
Like Reply · 1 Reply
chike chime • 2nd 5y

Realtor /CDPE at Metrotrust properties
Export managers insurance coverage is a limited specialty products not

necessarily available in the open market for underwriting factors.
Very limited.
…see more
Like Reply
Olaoluwatomi Adesina (安天美) • 2nd 5y

Business Project Manager at Paystack
This analysis is fantastic. Thanks for sharing such technical details in a way
that is easy to understand.
Like · 1 Reply · 1 Reply
Chidi Odoemenam • You 5y

Commercial Lawyer | Senior Associate at Rendeavour, Alaro City
Thank you
Like Reply
Show 1 more comment
Chidi Odoemenam
Commercial Lawyer | Senior Associate at Rendeavour, Alaro City
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6/13/24, 1:55 PM (17) Cross-border Insurance in Nigeria: A Legal Impossibility?

Cross-border Insurance in Nigeria: A

February 19, 2018

A business-friendly regulatory environment for the Nigerian insurance sector

What is Insurance? Insurance is a contract, represented by a policy, in

Insurance serves a number of important economic functions that are

Regulation of Insurance business in Nigeria

Insurance business in Nigeria is primarily regulated by the Insurance Act

Intending insurance companies are required to submit requisite

It is important to note that there is no provision of Nigerian law

However, the Insurance Act indirectly regulates cross-border insurance

Domestic insurance or reinsurance under the Insurance Act is stated to

Key takeaways from the above mentioned section are:

1. The restriction on cross-border insurance applies to “life, asset, interest or

However, if the Nigerian insurance customer satisfies NAICOM that by

The NAICOM Market Conduct and Business Practice Guidelines, 2015

The legal impossibility of cross-border insurance in Nigeria is a product of

Chidi Odoemenam is a lawyer at Aluko & Oyebode. His areas of practice

Chizitereihe Oti and 22 others · 6 comments

Like Comment Share

Fabian Ohore • 1st 5y

Like Reply · 1 Reply

chike chime • 2nd 5y

Export managers insurance coverage is a limited specialty products not

Olaoluwatomi Adesina (安天美) • 2nd 5y

Like · 1 Reply · 1 Reply

Chidi Odoemenam • You 5y

Show 1 more comment

More from Chidi Odoemenam

See all 13 articles

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