Covid-19 and The Birth of Pandemic Insurance in Nigeria

On the 11th of March 2020, the World Health Organisation (WHO) upgraded the status of the COVID-19, from an “epidemic” to a “pandemic” taking into consideration, “the alarming levels of its spread, severity and inaction” and the expectation that the number of cases, deaths and affected countries will continue to climb. 

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On the 11th of March 2020, the World Health Organisation (WHO) upgraded the status of the COVID-19, from an “epidemic” to a “pandemic” taking into consideration, “the alarming levels of its spread, severity and inaction” and the expectation that the number of cases, deaths and affected countries will continue to climb. 

As at 30th April, 2020, COVID-19 had spread to virtually every country on earth with over three million confirmed cases and more than two hundred thousand deaths. 

In Nigeria, in a bid to contain the spread of COVID-19, President Muhammadu Buhari on Monday, 30th March, 2020 announced a lockdown of Lagos State, Ogun State and the Federal Capital Territory, Abuja, with the exception of the providers of essential services. Later, interstate travel was restricted. Prior to these, our airspace was closed, and our land borders shut. Most countries did the same and the world economy consequently shut down. Indeed, things may never go back to the normal as we knew it. 

The COVID-19 pandemic and the consequent lockdown has occasioned loss of profits to many businesses, whose earnings are directly affected by the lockdown. The Federal Government and the Central Bank of Nigeria have come up with many policies and approved funds to assist qualifying businesses to cushion the effect of the COVID19 pandemic. The question that concerns us here is whether there exist opportunities for businesses to have hedged the risk of COVID-19 in Nigeria. This brings us to the issue of pandemic insurance, the focus of this article.

First, a brief explanation of insurance for the benefit of the layman. An insurance contract can simply be defined as a contract whereby a person called the insurer in consideration of money paid to him (called the premium) by another person called the assured, agrees to indemnify or compensate the latter against loss resulting to him on the happening of certain events. Some classes of insurance like life insurance are not concerned with indemnity but rather a form of financial or estate planning. 

The law governing insurance contracts in Nigeria is the Insurance Act of 2003 (the Act), while the insurance industry is regulated by the National Insurance Commission (“Commission”).

Is there provision for pandemic/epidemic insurance under Nigerian law? The answer seems to be in the affirmative. The Act classifies the Nigerian insurance business into two (2) main categories – Life Insurance Business and General Insurance Business. The latter is further categorised into 8 sub-categories namely: fire insurance business; general accident insurance business; motor vehicle insurance business; marine and aviation insurance business; oil and gas insurance business; engineering insurance business; bonds credit guarantee & suretyship insurance business; and miscellaneous insurance business. 

Insurance is categorised based on risk, type, and hazard; and clearly, the Act recognises the limited nature of these categories (and by extension, subcategories) and the need to provide for the expansion of insurance businesses. It is only common sensical to cater for the manifestation of erstwhile unknown or extremely rare risks and hazards. This justifies the inclusion of a “miscellaneous insurance business” subcategory. Hence, in Nigeria, the introduction of a pandemic/epidemic insurance business shall fall under the miscellaneous subcategory. 

An insurer interested in transacting a new subcategory of insurance business only needs to show evidence of an adequate reinsurance arrangement in respect of that category of insurance business which is the subject of the expansion, requisite capital where necessary and the satisfaction of other conditions as may be required from time to time by the Commission.

These requirements placed on an insurer are necessary because of the very nature of most insurance businesses. The insured entrusts his money to the insurer, but in return receives only a promise of payment in the event of specified events happening. Thus, regulation has long been necessary to ensure so far as possible, that insurers can meet their obligations. For an insurance company seeking to expand its insurance business to include a pandemic/epidemic insurance, it must ensure that it complies with the requirement as to the minimum paid-up share capital for the category of general insurance and in addition, obtains the approval of the Commission for the introduction of the new product.

We are not aware of any business that has taken out a pandemic insurance in Nigeria. It is certainly not common, even though there have been sufficient events in the last twenty years that should have warned businesses that the day of COVID-19 and the likes will come. The outbreaks of severe acute respiratory syndrome (SARS) in Year 2003, the Middle East Respiratory Syndrome (MERS) in Year 2009, and closer home, the Ebola virus outbreak in Year 2014 which shut down three countries – Sierra Leone, Liberia and Guinea and spread to many countries including Nigeria. It would thus have been prudent to take out a pandemic insurance. The organisers of the Wimbledon tennis tournament had the foresight to take out a pandemic insurance paying a premium of about $1.9 million per year following the SARS outbreak, paying in total about $31.7 million in premiums over the period up to COVID-19 pandemic. Wimbledon is now set to receive an insurance payout of around $142 million for this year’s cancelled tournament. Although this sounds like a huge pay out, it is less than the total reimbursement of the $363 million which is what the tournament would have earned, had the tournament actually taken place, broken down as follows: $160 million in media rights; $151 million in sponsorships and $52 million in annual ticket sales.9 Still, by virtue of this pay out, Wimbledon is in a much better position and in fact, is several steps ahead of most businesses for having this insurance in place.   

In conclusion, the COVID-19 pandemic provides a unique opportunity for the Nigerian insurance industry to expand its options of available insurance covers to a huge market, such as Nigeria. If erstwhile, the eyes of the potential insured were closed to the idea of securing an insurance policy for “once in a blue moon” risks such as the situation we find ourselves, the ripple effects of the COVID-19 pandemic on the world order and economy should serve to open their eyes to consider the need to mitigate the risk of epidemics and pandemics which are now not so rare. Hopefully, the Nigerian insurance industry has found a fertile ground for the promotion and growth of pandemic insurance in Nigeria.


  1. Five Things You Should Know Now About the COVID-19 Pandemic>story.2020/03 
  2. Charles Chime v. United Nigeria Insurance Company Limited [1972] 2 E.C.S.L.R. 808 @ p. 811
  3. CAP I17, Laws of the Federation of Nigeria, 2003
  4. See Section 2(1)(a) and (b)  of the Insurance Act 2003
  5. See Section 2(3)(h) of the Insurance Act 2003
  6. See Section 2(5) of the Insurance Act 2003
  7. John Birds, Birds’ Modern Insurance Law, 8th Ed., Sweet & Maxwell (2010)
  8. See Section 16 of the Insurance Act 2003 
  9. Wimbledon Shows How Pandemic Insurance Could Become Vital For Sports, Other Events