Lagos Tests the Waters with Mandatory Building Insurance

With Lagos introducing compulsory building insurance, attention is on whether the law can curb recurring 

building collapses, writesEbere Nwoji

The Lagos State Government has taken a decisive step towards strengthening public safety and risk management by launching the Lagos State Building Insurance Scheme, the first comprehensive state-level implementation of the compulsory building insurance provisions in the Nigerian Insurance Industry Reform Act (NIIRA) 2025.

The initiative marks a significant shift from decades of weak enforcement under the repealed Insurance Act 2003, which prescribed compulsory building insurance but achieved little in terms of compliance despite recurring building collapses across the country.

Structured around a digital compliance platform, the Lagos scheme is designed to extend compulsory insurance coverage initially to about 500,000 buildings across the state’s 20 local government areas. The first phase targets public buildings, commercial structures, hotels, schools and buildings exceeding two floors. At the same time, compliance and enforcement will be coordinated through the Lagos State Building Control Agency (LASBCA) using satellite mapping, integrated digital permits and other geospatial technologies.

The launch follows the enactment of the Nigerian Insurance Industry Reform Act (NIIRA) 2025, which repealed the Insurance Act 2003 and consolidated Nigeria’s fragmented insurance legislation into a single regulatory framework. Among its key provisions are Sections 75 and 76, which make builders’ liability insurance and insurance for public buildings compulsory. The legislation also strengthens consumer protection, reinforces the capital base of insurance companies and grants the National Insurance Commission (NAICOM) broader enforcement powers.

For the insurance industry, the Lagos initiative represents the first practical attempt to translate the provisions of NIIRA 2025 into an operational framework. While Ogun State had earlier introduced a similar scheme under the old insurance law, Lagos becomes the first state to implement compulsory building insurance under the new legal regime, providing what industry stakeholders hope will become a template for nationwide adoption.

Speaking at the launch, the Commissioner for Insurance and Chief Executive Officer of NAICOM, Mr. Olusegun Ayo Omosehin, described insurance as a critical instrument of social protection rather than merely a financial product. According to him, insurance enables families and businesses to recover from disasters such as building collapses, fires, and floods, thereby reducing economic disruption and preventing victims from slipping into financial hardship.

Omosehin explained that compulsory building insurance is intended primarily as a public safety measure. Under the new law, public buildings and buildings under construction above the prescribed height must carry insurance that protects not only owners but also occupants, visitors, workers and members of the public who may suffer injury or property loss arising from structural failures or construction-related accidents. He noted that Lagos had taken a federal law and transformed it into an enforceable state policy capable of delivering tangible protection to citizens.

The insurance industry has equally welcomed the initiative. President of the Nigerian Insurers Association (NIA), Mrs. Ebelechukwu Nwachukwu, said compulsory building insurance should be viewed as a safeguard for lives and investments rather than an additional burden on property owners. She observed that while compulsory insurance has existed in Nigerian law for years, weak enforcement has limited its effectiveness.

According to her, Lagos is attempting to bridge that compliance gap through digital technology, electronic Geographic Information Systems (e-GIS) and coordinated enforcement involving regulators, government agencies and insurers. She described the initiative as a proactive strategy to ensure insurance protection is in place before disasters occur, rather than after lives and property have been lost.

The renewed emphasis on enforcement comes against the backdrop of persistent building failures across Nigeria.

On June 25, 2026, a three-story shopping complex near Alakija Bus Stop along the Old Ojo Road in Lagos collapsed, reportedly killing nine people and injuring 26 others. On the same day, another building collapse occurred in Port Harcourt, Rivers State.

 These incidents have reinforced calls for stricter enforcement of compulsory building insurance nationwide as part of broader efforts to improve construction standards and protect the public.

Industry analysts argue that compulsory insurance extends beyond compensation after accidents. They contend that insurers, having assumed financial liability, are more likely to scrutinise construction quality, insist on the use of certified professionals and monitor compliance with engineering standards before underwriting projects. Such oversight, they say, could improve building quality while reducing the likelihood of structural failures. At the same time, wider insurance penetration would deepen the industry’s premium base and strengthen its capacity to absorb future risks.

The legal provisions governing compulsory building insurance have also become significantly more stringent. Under the repealed Insurance Act 2003, developers of buildings exceeding two floors were required to obtain builders’ liability insurance during construction, while public buildings were to be insured against collapse, fire, storm, flood and earthquake.

However, enforcement remained largely ineffective, with investigations into several collapsed buildings revealing little evidence of insurance coverage.

NIIRA 2025 retains those provisions but substantially increases both obligations and sanctions. Section 75 requires builders’ liability insurance before construction begins on buildings with more than two floors.

The policy covers liabilities arising from negligence leading to death, bodily injury or property damage involving workers or members of the public. Violations attract penalties of up to N5 million, 12 months’ imprisonment, or both.

Section 76 extends compulsory insurance to public buildings, including schools, hospitals, shopping malls, hotels, hostels, tenement buildings and other facilities accessible to the public. The objective is to ensure that victims of structural failure or other insured risks have access to financial compensation without depending solely on government intervention or prolonged litigation.

Despite the strengthened legal framework, implementation remains the critical challenge. Insurance penetration in Nigeria remains among the lowest in Africa, while public awareness of compulsory insurance requirements is limited. Industry observers note that many developers continue to view insurance as an avoidable cost rather than an essential component of risk management, leaving workers, occupants and neighbouring properties exposed whenever construction standards fail.

NAICOM has repeatedly stated that enforcement of NIIRA 2025 will be pursued vigorously. The Commission describes the legislation as a cornerstone of broader reforms intended to modernise the insurance sector through stronger regulation, digital innovation, financial inclusion and improved consumer protection.

For Lagos, successful implementation will depend not only on digital monitoring and regulatory oversight but also on sustained collaboration among government agencies, insurers, developers and the public.

Whether the Lagos model ultimately succeeds may determine how quickly other states embrace compulsory building insurance. If effectively enforced, the scheme could help reduce the financial consequences of building failures, improve construction practices and strengthen public confidence in insurance as an essential element of urban development rather than a mere regulatory obligation.