Nigeria’s most significant insurance reform in a generation has, perhaps unintentionally, made the establishment of a domestic P&I club more difficult to achieve. That is not a criticism of the Nigerian Insurance Industry Reform Act (NIIRA), signed into law in August 2025. NIIRA 2025 is a genuine and long-overdue modernisation of a framework that had not kept pace with the sector it governs. However, embedded within the provisions of the NIIRA 2025 is a fundamental tension that the Maritime industry cannot afford to ignore — one that the National Insurance Commission now has both the authority and responsibility to resolve.
The tension is this: NIIRA 2025 requires every licensed insurer in Nigeria to be incorporated as a limited liability company under the Companies and Allied Matters Act. While that requirement is appropriate for most of the insurance sector, it is ill-suited to Protection and Indemnity mutual insurance, which is designed as a mutual structure rather than a limited liability company.
Without a domestic P&I club, Nigeria will continue to cede an estimated $4 to $5 billion in premiums annually to foreign institutions, underwriting risks abroad that originate entirely within its own waters.
As discussed extensively in one of my earlier articles, the NIIRA, by restricting insurers to limited liability corporate entities, effectively closed the door on the mutual structure that underpins global marine liability insurance. While the regulatory gap was identified at that time, the existing framework still contains the mechanisms to bridge it.
Importantly, NIIRA 2025 does not leave the regulator without options. Section 200 provides a legal foundation for a different regulatory approach, and any meaningful discussion must begin with a proper understanding of what that provision permits.
Why the Mutual Form Cannot Be Replaced
P&I clubs are mutual associations because maritime liability makes the shareholder-owned insurer model structurally unworkable for this category of risk.
The liabilities that P&I covers — pollution claims, wreck removal, cargo disputes and crew liabilities — are often catastrophic in scale, long tail and international in nature. A commercial insurer must price these risks to generate returns for investors. A mutual, owned by the shipowners who bear the risk, prices for long-term sustainability, calls on members when losses exceed contributions, and returns surpluses when they do not.
The incentive structures are entirely different, and that difference is why the mutual form has persisted.
The International Group of P&I Clubs, which covers a large share of the world’s oceangoing tonnage, is composed entirely of mutual associations. Every domestic P&I structure that any country has successfully built, as seen in Asian economies such as China, Japan, and South Korea, has been built on the same form.
It is not just a convention. This is what works for this risk class.
When Nigerian law makes limited liability incorporation the condition of insurance licensure, it does not merely add a procedural requirement. It blocked the institutional model needed for P&I insurance.
This is the legislative gap that NIIRA 2025 created, even as it strengthened the sector in almost every other respect. The existence of the gap is not in question, but whether the existing legal architecture contains the means to bridge it without waiting for further primary legislation.
What Section 200 Provides
Section 200 of NIIRA 2025, titled “Regulations for the operation of specialised insurance institutions”, grants NAICOM the authority to issue regulations governing insurance structures that fall outside the standard licensing framework.
The provision is deliberately broad, designed to give the regulator wide discretionary powers to respond to novel or specialized institutional forms without requiring the National Assembly to enact fresh primary legislation each time a new structure emerges.
Together with NAICOM’s broader supervisory powers, Section 200 provides the legal foundation for the Commission to establish a dedicated regulatory framework for a marine insurance mutual model.
Such a framework could recognize the membership contribution model, the pooled loss-sharing structure, and the governance arrangements that distinguish a P&I club from a conventional insurer, all without amending NIIRA itself.
The Commission would not be creating a legal exception; it would be exercising an authority that the National Assembly has already conferred on it.
There is further support in the Act’s application provisions. Section 2(2) of NIIRA 2025 explicitly exempts friendly societies — associations of persons established with no share capital for purposes of mutual aid among members — from the Act’s requirements entirely.
A marine mutual structure on those principles falls outside the conventional licensing regime by design, operating instead under any specialized framework NAICOM establishes under Section 200.
The legislation, read in full, is considerably more accommodating of the mutual model than a first reading of the incorporation requirement suggests.
What Section 200 does not do is create that framework automatically. It creates the authority for NAICOM.
The framework — including capital requirements, governance standards, supervisory obligations, and claims protocols — must be actively designed and implemented by NAICOM. That is where regulatory willpower becomes the determining variable.
From Legal Permission to Institutional Reality
The existence of a regulatory pathway matters enormously. But it is worth being clear about what it does and does not resolve.
Legal recognition is the prerequisite for a domestic P&I mutual, but it is not its guarantee.
Every element of what makes a P&I club credible to the shipowners, offshore operators, and reinsurers whose participation it needs — such as underwriting expertise, depth of claims handling, financial reserves, and correspondent networks — must be built through sustained institutional effort that no provision of law can substitute for.
NAICOM’s regulatory sandbox, established in 2023 and the subject of the next article in this series, is the mechanism that converts legal permission into structured development.
It provides a controlled environment in which a novel insurance structure can be tested and refined before being exposed to the full weight of conventional regulatory obligations.
For a nascent P&I mutual, the sandbox is the appropriate and intended pathway from legal possibility to operating institution, and not simply a workaround.
The local content obligations in the Nigerian Oil and Gas Industry Content Development Act (NOGICD) provide the demand foundation.
Section 49 requires that all insurable risks in the oil and gas sector be placed with Nigerian underwriters. Section 50 prohibits offshore placement without NAICOM’s written approval.
That mandate exists regardless of whether a domestic P&I club does. However, the missing piece is the institutional structure capable of fulfilling it.
Section 200 of NIIRA provides the regulatory authority to build that structure, and the sandbox provides the environment to develop it.
Years have been spent making the argument for a domestic P&I club. That argument has now been made and received at the highest levels of insurance regulation.
The legal framework, properly read, already contains the tools to act on it.
The next milestone is now how quickly the institution with the authority will move to make it a reality.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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