Implementing Compulsory Building Insurance Act
In a significant move, the Ogun State Government has initiated enforcement of compulsory building insurance, following similar measures in Lagos State. We spoke with Ebere Nwoji about how this initiative could potentially reduce the frequency of building collapses across Nigeria if adopted by other states.
Under the new mandate, all buildings over two stories must carry insurance coverage, in accordance with Sections 64 and 65 of the Insurance Act of 2003. This legislation requires those constructing such buildings to insure against liabilities related to construction negligence. Noncompliance can lead to hefty penalties, including fines of up to N250,000 or a possible three-year imprisonment.
Moreover, the act stipulates that all public buildings must be insured against risks like collapse, fire, floods, and earthquakes. The term “public buildings” includes a variety of structures, such as tenement houses and facilities serving educational, medical, or recreational purposes. Notably, a fraction of the insurance premium must go toward a Fire Services Maintenance Fund to bolster firefighting efforts nationwide.
Despite the clarity of the 2003 act, compliance has been disheartening among builders, property owners, and tenants, fueling a troubling trend of building collapses. For example, a report from the BBC on September 1, 2024, noted that Lagos experienced an average of one building collapse every two weeks this year alone. One expert highlighted that in the last 12 years, at least 90 buildings in Lagos have collapsed, resulting in significant fatalities and property damage, often without any compensation due to the absence of insurance.
A particularly devastating case was the 2021 collapse of a 21-story building in Ikoyi, which tragically claimed 21 lives and was revealed to lack the requisite insurance coverage.
Experts view Ogun State’s commitment to enforcing this insurance act as a step in the right direction, encouraging other states to adopt similar measures. Analysts contend that making insurance mandatory not only ensures compensation for disaster victims but also incentivizes builders to focus on creating safer, more robust structures. Insurance companies would likely refuse coverage for buildings that do not meet established safety standards.
The Nigerian Council of Registered Insurance Brokers (NCRIB) expressed support for this initiative, advocating that it would promote economic growth and enhance workplace safety. In a letter to Ogun State Governor Prince Dapo Abiodun, NCRIB President Prince Babatunde Oguntade expressed optimism that this enforcement would create a safer environment for construction workers and positively influence the state’s economy.
To formalize this, Ogun State requires all multi-story buildings to have an All Risk Insurance Policy Certificate. During a recent meeting with stakeholders, Mr. Olatunji Odunlami, the state’s Commissioner for Physical Planning and Urban Development, stressed that this policy aims to protect both human and material assets throughout construction.
Mr. Segun Bankole, a member of the Publicity Committee for the Lagos State Compulsory Insurance Building Committee, acknowledged that while the concept of compulsory insurance has been discussed at the federal level, enforcement has been lacking. He pointed out that the rising incidence of building collapses in Nigeria highlights the pressing need for all state governments to adopt this initiative, particularly in high-risk areas like Lagos, where many older buildings remain uninsured.
Bankole also remarked that before effective enforcement can occur, the government must ensure its own properties are insured and suggested the creation of a dedicated agency to certify that builders comply with insurance requirements prior to beginning work.
Meanwhile, the National Insurance Commission (NAICOM) is actively working to strengthen mandatory building insurance regulations. At the 2023 National Insurance Conference in Abuja, they introduced a ten-member committee tasked with overseeing the insurance of public buildings. The former Insurance Commissioner, Mr. Sunday Thomas, conveyed optimism that this initiative would revolutionize the Nigerian insurance sector and elevate safety standards across the economy.
