Petroleum exploration, production, transport and retail all carry high risk. Insurance helps operators manage that liability, protect assets and keep running after a loss. The Nigerian Insurance Industry Reform Act now changes how that cover must be arranged.
The Nigerian Insurance Industry Reform Act, 2025 (NIIRA) is now law. It repeals the Insurance Act 2003 and sets a new framework for the whole insurance industry. Its scope is general. Even so, several provisions bear directly on the oil and gas value chain.
In this Newsletter, we highlight the provisions of the NIIRA relevant to the oil and gas industry, their practical effects, and implications for stakeholders.
How the Nigerian Insurance Industry Reform Act classifies oil and gas cover
An insurer still needs a licence from the National Insurance Commission (NAICOM) to write oil and gas risks. The category has changed, though. NIIRA groups oil and gas cover with power cover in a wider “energy” class of non-life business. As a result, insurers must hold specific energy licensing. That limits underwriting to firms with real technical and financial capacity.
Restriction on foreign insurance
Operators must place domestic risks with NAICOM-registered insurers. NIIRA now says plainly that oil and gas insurance and reinsurance count as domestic business. So an operator cannot use a foreign insurer unless local capacity falls short. A breach can cost up to five times the premium involved.
An exemption route still exists. An oil and gas company may ask NAICOM to approve foreign cover in exceptional circumstances. That includes a risk of an exceptional nature. Neither NIIRA nor the old Act defines the phrase. However, the courts read “exceptional” as much greater than usual, and “exceptional circumstance” as unusual or extraordinary. On that reading, ultra-deep offshore drilling, complex LNG plants and large integrated projects should qualify where domestic insurers cannot carry the risk.
Retail outlets and products in transit
NIIRA adds a new duty for the midstream and downstream sector. Owners and operators of petroleum liquid and gas refilling stations must hold third-party cover against accidental fire or explosion. The same duty falls on owners of petroleum liquid and gas products in transit. Each must display the certificate of insurance. Stations display it on site, and carriers keep it with the transit papers. A breach can bring a fine of ₦1,000,000, a minimum of two years’ imprisonment, or both.
Imports, financing and divestments
Importers must also insure petroleum products with NAICOM-registered insurers. That rule overrides any contrary contract term. The penalty for a breach has risen. It is now ₦1,000,000 or the premium involved, whichever is higher.
The reforms reach deal structures too. Oil and gas financings often take security over insurance policies. The lender takes an assignment of the borrower’s rights under the cover. NIIRA confirms that parties can assign insurance contracts. An assignee may then sue in the policyholder’s name.
Two limits matter for deals. A marine policy can bar assignment outright. A transfer of interests under a marine policy also needs an express or implied agreement between the assured and the assignee. Therefore acquirers and lenders should review a target’s policies early. They should vary any restrictive term before financial close. Our Oil & Gas: 2025 Wrap-up and 2026 Outlook gives the wider sector picture, and our note on the new minimum capital framework in Nigeria’s insurance sector explains the capacity question behind these rules.
Click the button above to read our full analysis of the Nigerian Insurance Industry Reform Act and its impact on the oil and gas sector.