NAICOM

• Over 90% of aviation, maritime insurance premiums sent abroad
• Sector reform threatened by poor capacity, trust deficit
• ‘Weak capacity fuelling N82b capital flight in maritime’
• Sosoliso crash victims yet to be compensated 21 years after
• NAICOM defends risk sharing with foreign firms

The perennial low capacity of local insurance underwriters currently accounts for Nigeria’s 90 per cent reliance on foreign insurance firms, which bill the aviation and maritime sector an estimated N500 billion yearly.

Despite reforms in the insurance sector, estimates indicate that its penetration remains at 0.5 per cent – a far cry from Africa’s average of three per cent.

Stakeholders are counting on the recent recapitalisation reform to significantly bolster local capacity. However, months after the reforms, the gains are still awaited.

Indeed, the insurance sector is tipped as a potential driver of the economy. But its inability to provide mutual cover for the critical sector, which draws from its low perception and contributes to it, has partly incapacitated its contribution to the country’s gross domestic product (GDP).

Worried about the sector’s historically poor performance, some stakeholders said the success of the Nigerian Insurance Industry Reform Act (NIIRA) 2025 would depend on how quickly the sector can recover lost ground, including underwriting risks in aviation and maritime.

It is estimated that Nigeria loses about $360 million (about N500 billion) yearly to capital flight due to ongoing offshore insurance by the two sectors.

Besides, about 90 per cent of assets in the sectors are insured abroad because the country’s local operators lack the capacity to underwrite large-value assets, contrary to the Commission’s position.

For instance, Nigerian ships, airlines, cargo-handling companies, oil tankers, offshore rigs, port infrastructure, and other auxiliary organisations insure their critical assets with Lloyd’s of London and major European and American insurance companies.

But the new insurance law amends Section 204 of the NIIRA2025, which requires that local insurers be given the first opportunity to underwrite risks before recourse is made to foreign insurance markets. The provision is not primarily about a lack of local capacity; rather, it reflects the core insurance principle of risk spreading, whereby risks are distributed across insurers and markets to prevent excessive concentration and mitigate the potential impact of catastrophic losses.

The over 60 insurance companies, pre-recapitalisation, have consistently proved to lack the financial wherewithal to insure these assets. The National Insurance Commission (NAICOM) is betting on the recapitalisation to expand operators’ capacity to carry higher risks.

The Guardian investigation indicated that there are no fewer than 100 aircraft in the fleet of the country’s scheduled carriers, with most of the assets insured abroad. As of December last year, about 38 of them were airworthy, while the others were in maintenance workshops abroad.

Some of the aircraft brands are Boeing, Airbus, Embraer, ATR and many others.

The non-scheduled operators and private jet owners have about 240 aircraft in their fleets, the Minister of Aviation and Aerospace Development, Festus Keyamo, said. These range from Gulfstream-G550-G650, Bombardier Challenger, Hawker-800XP-900XP (Beechcraft), Dassault Falcon 7X, 900, Embraer Legacy 600, Embraer Phenom 300 and ATR-242-72, among others.

As of 2025, Nigeria’s insurance industry generated N1.98 trillion.

According to the National Insurance Commission (NAICOM), the insurance industry’s total assets were N4.4 trillion in the second quarter of 2025. Of the total N2.5 trillion in non-life business assets, marine portfolios contributed 8.8 per cent.

Also, marine insurance recorded a 69.7 per cent settlement ratio in the non-life segment of the market.

As of March 2025, data obtained from the Nigerian Maritime Administration and Safety Agency (NIMASA), Nigeria had a fleet of 4,610 flagged vessels with a total tonnage of 6,131,814.55 gross registered tonnage (GRT) and 1,102 cabotage vessels with a combined tonnage of 2,037,184.63 GRT. Most of the assets, cargo and vessels are insured abroad, industry information said.

But the National Insurance Commission (NAICOM) insisted that Nigerian insurers have the capacity to underwrite complex aviation and oil-and-gas risks. Besides, domesticating these risks is supported by extant laws and regulatory frameworks.

NAICOM’s Head of Corporate Affairs, Abba Halil, told The Guardian that the use of foreign reinsurance and risk distribution is standard global risk management practice and not a reflection of local inadequacies.

He insisted that local insurers actively participate in underwriting high-risk sectors, but typically retain a portion of such risks, while ceding the balance to international reinsurers with large capital bases.

This, he said, enabled operators to optimise capital effectively, diversify exposures and safeguard against large-scale losses, particularly in specialised segments where risks are significant.

Experts decry Nigeria’s loss of business, opportunities
Experts in the maritime sector, however, expressed concern that Nigeria loses at least $60 million (about N82 billion) yearly due to capital flight to foreign insurers for cargo, vessels, and other assets.

Dean of Faculty at City University, Cambodia, Prof. Alfred Oniye, confirmed to The Guardian that a large proportion of vessels and cargo in Nigerian waters are insured with foreign firms, especially for protection and indemnity (P&I) coverage, noting that Nigerian insurers handle only a small fraction of maritime risks.

Oniye insisted that Nigerian insurers lacked the financial strength to cover high-value maritime risks, noting that few specialised underwriters exist for complex marine insurance.

According to him, international shipping companies often demand insurance from globally recognised firms to meet trade and compliance standards, as foreign insurers are perceived as more reliable in claims settlement and risk management.

He said: “Stakeholders prefer foreign insurance because it gives them access to global reinsurance markets for large claims, compliance with international maritime conventions that recognise foreign insurers, better risk pooling and wider coverage options compared to local firms.”

Oniye said billions of dollars are lost yearly to foreign insurers, noting that about N81.8 billion was lost in 2022, far above the N37.8 billion allowed under the local content law.

The dean also noted that indigenous insurers remain underdeveloped, adding that dependence on foreign insurers exposes Nigeria to external shocks.

He also mentioned limited employment in insurance and maritime support services, which he said undermined Nigeria’s Local Content Act and 2006 Cabotage Act.

Director of International Trade at the Maritime Researchers and Authors Association of Nigeria (MARASSON), Sunday Ademuyiwa, said many companies operating in Nigeria’s maritime industry often maintain a combination of local and foreign insurance cover.

Ademuyiwa, like Oniye, said limited local capacity and expertise are key factors driving Nigerian maritime operators to rely heavily on foreign insurance providers, despite ongoing government efforts to boost local participation in the sector.

He noted that although Nigeria’s insurance market is growing, with firms such as Mutual Benefits Assurance PLC providing marine insurance services, operators still largely depend on foreign underwriters for their global reach and financial strength.

Ademuyiwa explained that foreign insurers retain a competitive edge due to their international coverage, expertise, established reputation among global shipping companies, and greater risk-absorption capacity, which enables them to offer more comprehensive policies.

He pointed out that the Federal Government, through reforms such as the NIIRA Act 2025, was seeking to reverse this trend and promote local insurance by strengthening local participation and reducing capital flight.

Despite the challenges, Ademuyiwa expressed optimism that a growing number of indigenous shipowners entering the Nigerian market could stimulate demand for local insurance services and drive capacity building and expertise development within domestic content opportunities.

He urged the government to explore strategies to develop the local insurance market and promote local content in the maritime sector.

Ademuyiwa also charged relevant regulatory bodies, including NAICOM, NIMASA, and the Nigerian Insurers Association (NIA), to collaborate on policies to strengthen local insurers, enhance technical expertise, and promote greater adoption of indigenous insurance solutions to drive industry growth.

Head of Research, Sea Empowerment and Research Centre (SEREC), Dr Eugene Nweke, lamented that weak local underwriting capacity, heavy reliance on foreign insurers (particularly for P&I coverage), significant dependence on foreign reinsurance and poor alignment between the country’s trade and insurance policies have collectively stifled the growth of indigenous insurers.

Nweke explained that Nigeria’s trade structure further compounds the problem, as exports are largely conducted on a free on board (FOB) basis, allowing foreign buyers to control insurance, while imports are transacted on a cost, insurance and freight (CIF) basis, leaving insurance arrangements in the hands of foreign sellers.

Nweke said this dual structure effectively excludes Nigerian insurers from both ends of the value chain.

The SEREC research chief identified foreign dominance of marine insurance as one of the most pressing issues, noting that critical segments such as P&I insurance remain almost entirely controlled by offshore institutions, limiting local participation and revenue retention.
Nweke also pointed to weak enforcement of local content laws, explaining that although regulations mandate local participation, offshore insurance placements are frequently approved, while monitoring mechanisms remain inadequate.

He highlighted capacity constraints among local insurers, including a limited capital base, insufficient technical expertise, and a lack of global claims infrastructure, which have made it difficult for them to compete effectively with international firms.

Nweke warned that the continued reliance on foreign insurers has led to massive capital flight and foreign-exchange pressure, with billions of dollars paid annually in premiums abroad, thereby worsening foreign-exchange scarcity, contributing to naira depreciation, and constraining the growth of Nigeria’s financial sector.

He also flagged the high cost of maritime trade as a major concern, with foreign insurers imposing high premiums, including war risk charges, thereby increasing freight costs, raising import prices, and fueling inflationary pressures.

The SEREC researcher noted that the current cumulative effect of these challenges on the economy includes the loss of national revenue from offshore premium payments, the underdevelopment of the local insurance and maritime sectors, reduced employment and skill-development opportunities, and limited national control over maritime liabilities and claims.

SEREC advocated that maritime insurance localisation should be treated as a national economic security priority, noting that by retaining insurance premiums within Nigeria, the country could conserve foreign exchange, strengthen its financial system, enhance trade competitiveness and unlock the full potential of the Blue Economy.

Nweke also outlined a series of strategic policy recommendations, beginning with calls for a transition of exports from FOB to CIF terms to enable the country to capture insurance and freight value, while also encouraging importers to adopt frameworks that allow local insurance to gain control of the market.

He stressed the need for stronger regulatory enforcement, including strict approval processes for offshore insurance placements and minimum local retention thresholds.

Among other recommendations, Nweke advocated establishing a Nigerian P&I Club through a public-private partnership model and gradually scaling from domestic to international coverage.

He also proposed tax incentives for local insurers, alongside targeted support for technical development and capacity building.

A history of poor coverage
For the country’s aviation industry, the loss is massive. Airlines, ground handling companies, catering services, and other auxiliary companies seek cover from foreign insurers for their equipment and machinery.

Before now, the sector suffered human and equipment losses due to inadequate insurance coverage.

For instance, families of the Sosoliso Airlines victims of flight 1145 crash, including parents of about 60 students of Jesuit College, Abuja, at the Port Harcourt International Airport (PHIA) on December 10, 2005, are yet to get the required minimum $100,000 compensation stipulated by the International Civil Aviation Organisation (ICAO).

This is because the DC-9 aircraft with registration number 5N-BFD did not maintain sufficient insurance coverage.

The airline’s management, led by Victor Ikwuemesi (now deceased), had offered the victims’ families $10,000 each in compensation, an offer that the then Director-General of the Nigerian Civil Aviation Authority (NCAA), Dr Harold Demuren, rejected. Demuren insisted on full compliance with international standards.

Almost 21 years later, the families of the victims are still in court to challenge the management of the defunct airline on compensation for their loved ones.

Speaking on the issue, the Chief Executive Officer of Nigame Aircraft Consultancy, Femi Adeniji, said that the Federal Government, through the country’s aviation sector, may be losing between $200 million and $400 million yearly to offshore insurance premiums.

He attributed this to weak local underwriting capacity and strict international leasing requirements, especially for aircraft hull and liability insurance, where asset values can range from $50 million to $200 million per aircraft.

He identified key challenges as inadequate capital base, limited foreign exchange reserves and weak international credit ratings bedevilling the insurance sector in Nigeria.

Adeniji explained that while Nigerian laws do not explicitly encourage offshore insurance, structural gaps in the domestic insurance market had made foreign placement almost inevitable for high-value aviation risks.

According to him, the repealed Insurance Act 2023 and the new Act, NIIRA 2025, mandate that risks located in Nigeria be insured locally first, except in cases where such risks cannot be adequately handled in the domestic market.

He added that the NCAA ensures that operators meet global safety and liability standards, including securing insurance coverage from firms with strong international credit ratings.

On offshore insurance placement, Adeniji noted that such arrangements are typically facilitated through local insurance companies registered with NAICOM.

To reverse the current situation, Adeniji called for significant investment in the insurance sector, including stronger foreign-exchange capitalisation, development of specialised aviation insurance expertise, improved claims management capabilities, formation of robust domestic insurance pools, and strategic partnerships with global reinsurers.

Also, aviation analyst Samuel Caulcrick confirmed deep structural weaknesses as a major reason aviation industry players continue to rely on foreign firms to underwrite large-scale risks.

Caulcrick noted that, despite steady growth, the industry remained constrained by a historically low capital base and weak market penetration, which currently stands at below 1 per cent.

According to him, although total industry assets exceeded N3 trillion as of late 2023, this had not translated into sufficient underwriting strength for high-risk and capital-intensive sectors.

He explained that this reliance on reinsurance often forces local insurers to cede a significant portion of premiums to foreign companies, thereby limiting domestic value retention.

Caulcrick argued that stronger legislation mandating broader insurance coverage across key sectors of the economy could significantly boost the industry’s growth and financial muscle.

He added that with improved regulatory backing, the insurance sector could expand rapidly, deepen penetration and potentially emerge as one of the largest institutional investors and depositors in the Nigerian banking system.

Caulcrick further pointed to Nigeria’s foreign reserve management as another limiting factor, maintaining that funds held outside the country reduce the domestic insurance market’s capacity to grow.

Aviation security expert John Ojikutu said Nigeria’s airports are not adequately covered.
He attributed this persistent reliance on offshore insurers to the country’s weak financial capacity and regulatory inconsistencies.

Ojikutu noted that Nigeria’s aviation sector continues to grapple with significant capital constraints, making it difficult for local insurers to underwrite high-value aviation assets, such as aircraft, which can cost $15 million to $30 million or more.

He also questioned the extent to which Nigerian airlines rely on local insurance for their operations, noting that most carriers still largely depend on foreign underwriters due to capacity gaps in the domestic market.

Besides, Ojikutu mentioned several airline accidents in the early 2000s and the failure of domestic insurance companies at the time to meet compensation obligations to victims.

Ojikutu warned that these regulatory gaps and financial weaknesses ultimately contribute to higher costs across the aviation value chain, including airfares, especially on international routes dominated by foreign airlines.

He questioned the Federal government’s approach to risk management, asking whether airport insurance was being treated with the same urgency as airline operations, particularly in an era when aircraft leasing and foreign partnerships are becoming increasingly dominant.

According to him, Nigeria’s lack of strong national or flag carriers further complicates the situation, leaving private airlines to negotiate complex insurance arrangements with foreign leasing companies from a position of weakness.