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The insurance sector is a key part of the financial service sector in Nigeria. In other emerging economies it has been identified as being critical to the ability of those markets to grow and develop, simultaneously providing an opportunity to hedge against possible risks of private, social and economic development. In the last two decade, the industry has witnessed series of reforms in order to restructure them for better performance in providing indemnity for loss and increasing capital formation in Nigeria. Between 1999 and 2009 most especially the sector has witness different regulation which has seen the sector restructured over 3 times, including merging and acquisition, rising of their capital base, among others in 2003, 2005 and 2008. This sector represents the backbone of Nigeria’s risk management system, as it mitigates the impact of risk and positively correlates to growth as entrepreneurs cover their exposures, in 2003, the capital base of life businesses was increased fr



1.1 Background of the study

It is a cardinal principle of insurance law that every contract of insurance must show that the insured has an insurable interest in the subject matter of the insurance; otherwise the contract is rendered invalid. In other words, where the insured cannot affirmatively establish that he will suffer financial loss in the event of the destruction of the subject matter of the insurance he can safely be said to have no insurable interest in the insurance, and the transaction as an invalid insurance. A person or company applying for insurance must have an insurable interest in the subject matter of the policy whether it is a person or property. One who might suffer financial loss through another’s death is said to have an insurable interest in that life. Thus, a husband and wife have an insurable interest in each other’s life. A creditor has an insurable interest in the life of a debtor. Each partner has an insurable interest in the life of other partners. Likewise, one who would suffer because of the destruction or loss of property has an insurable interest in that property. A secure creditor for example has an insurable interest in the secured property of a debtor. In each of these instances, the party seeking insurance would suffer a loss through death or destruction of the subject matter of the insurance policy. The law requires that every person who takes out an insurable policy must have an insurable interest in the subject matter of the insurance. If the insured has no insurable interest, the contract is invalid; it is a gambling or wagering contract and not an insurance contract Phillimore , J


.. Insurable interest has been described as the legal right to insure, the implication being that its absence amount to an absence of the legal right to insure. In order to constitute an insurable interest, the insured must be in some legally recognised relationship to what is insured whereby he will suffer some financial




In Hebdon v. West (1803) B & 579.


Adefuye v. Royal Exchange Assurance (1962)LLR 43.

loss by the happening of the event insured against. Insurable interest give the insured the locus standi to sue as any one can only sue in respect of his own interest unless by special provision the law allowing it, the policy is made for the sake of another. The marine Insurance Act 1961 define insurable interest as; ‘Every person has an insurable interested who is interested in a marine adventure’ Section 7(2) of the same Act gives Interpretation to the phrase ‘Interested in a marine adventure’ to mean, ‘A person is interested in marine adventure where he stands in any legal or equitable relation to the adventure or to any insurable property at risk therein consequence of which he may benefit by safety of the insurable property or may be prejudiced by its loss or damage thereto, or by detention thereof or may incur liability in respect thereof’.

A very comprehensive and classical definition of insurable interest was given by the Court in the leading English case of Lucena V Crawfuad


,  as follows: ‘A man is interested in a thing to whom advantage may arise or prejudice happen from the circumstances which may attend it. Interest does not necessarily imply a right to the whole , or a part of a thing,  nor necessarily and exclusively that which may be the subject of privation, but having some relation to, or concern in the subject of the insurance, which relation or concern by the happening of the  perils insured against may be so  affected as to produce a damage, detriment or prejudice to the person insuring and where a man is so circumstanced with respect to matters exposed to certain risks or dangers as to have a moral certainty of advantage or benefit but for those risks or dangers, he may be said to be interested in the safety of the thing. To be interested in the preservation of a thing is to be circumstanced with respect to it as to have benefit from its existence, prejudice from its destruction. 

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