Insurers toy with plan to revive oil, energy pool

Daniel

By Sola Alabadan

More than two years after setting up a committee to resuscitate the Nigerian Oil and Energy Insurance Pool as a way of exploring the provisions of the Nigerian Oil and Gas Industry Content Development Act 2010 and increasing local capacity, the Nigerian Insurers Association (NIA) is yet to conclude work on the exercise.

In June 2012, the then Chairman of NIA, Olusola Ladipo-Ajayi, confirmed that "the National Insurance Commission (NAICOM) set up a committee during the year to consider the desirability of establishing an Oil and Gas Pool" and that "the report of committee was immediately passed to the NIA for implementation."

In June 2013, NIA's Director General, Sunday Thomas, informed that "Following the report of the committee set up by the Commissioner for Insurance to look into how the industry can explore the provisions of the Nigerian Content Act 2010, the Governing Council, through its own committee, reviewed the report and recommended the resuscitation of the existing Nigerian Oil and Energy Insurance Pool. The committee has continued to make progress in fine-tuning other details required for the effective take off of the pool to enable it achieve its goals in increasing local capacity."

Again in June 2014, NIA's Director General repeated that "the association's committee saddled with the responsibility of establishing the pool has continued to fine-tune the processes that will ensure the successful take-off of the pool."

However, analysts argued that considering the nation's comparative advantage in the oil and gas sector, the insurance operators should have fast-tracked the process of re-establishing the pool so that the industry can reap the full benefit of the Local Content Act.

It is believed that if the insurance companies can pull their resources and expertise together, this will ensure that the golden opportunity provided by government, through the local content policy in the oil and gas industry, does not slip away from the industry.

Before the Nigerian Content Act was enacted, insurers lamented capital flight and loss of foreign exchange earnings as a result of dominance of foreign players in the market.

Although insurers were expected to have started underwriting 30 per cent of risks emanating from the oil and gas industry as early as 2007, and 70 per cent from 2010, the Commissioner for Insurance, Fola Daniel, affirmed that the local retention in oil and gas insurance business rose from 6 per cent in 2010 to 30 per cent in 2013.

In 2013, the NNPC alone paid $71 million or N11.4 billion premium on its Consolidated Oil Programme but The Wheel, NNPC captive insurer in Guernsey retained about 55 per cent, while local underwriters handled 45 per cent.

Source Daily Independent