• Saturday, July 20, 2024
businessday logo

BusinessDay

Expert identifies local content impediments in Anglophone oil and gas insurance market

businessday-icon

Local content laws expected to increase local participation of insurance companies on oil and gas in the Anglophone West African market has not realized its objectives due to lack of financial and human capacity, expert has said.

Sunday Thomas, director general, Nigerian Insurers Association(NIA) who made the observation said despite the local content laws and regulations established in Nigeria and Ghana, insurance companies in Anglophone West Africa are yet to fully take advantage of the opportunity to effectively position themselves as major players capable of leading foreign firms in the underwriting of oil and gas business.

Thomas who authored an article “Local Content Insurance Regulation In Anglophone West Africa; published in the latest edition of Africa Re Quarterly journal said the level of capital required for writing big risks in the oil and gas sector is often lacking, which sometimes limits the local insurance industry’s underwriting and retention capacity. “In fact, risks in the oil and gas industry are enormous and involve huge financial outlays and therefore, require sound technical capacity to accurately assess.”

According to him, the issue of technical capacity of indigenous insurance companies still remains a challenge. While some of the big companies have put in place constructive human capital development programmes that will leverage on the local content policies, the same may not be the case for most of the companies that are still fringe players.”

Local Content is defined as ‘a set of deliberate orientation and actions to build domestic capacity relevant for service and product delivery comparable within that industry’ and ‘an opportunity to locally build a sustainable culture of service quality and capabilities exceeding customers’ expectations and comparable to international standards through key local personnel and management’

The local content regulations of the oil and gas industry seek to increase indigenous participation by prescribing thresholds for the use of local services and materials and promoting transfer of technology and skills. It is expected that the regulations will result in an increase in job creation and building necessary expertise in the local workforce that will make it internationally competitive.

Section 49 of the Nigerian Oil and Gas Industry Content Development Act, 2010 in Nigeria requires all investors in the oil and gas industry to insure all their insurable risks relating to the oil and gas business, operations or contracts with an insurance company, through an insurance broker registered in Nigeria under the provisions of the Insurance Act as amended. However, Section 50 of the same Act requires that where an operator desires to place insurance risk outside Nigeria, it can only be done with the written consent of the insurance sector regulator, the National Insurance Commission (NAICOM), which shall ensure that Nigerian local capacity has been fully exhausted.

For Ghana, in accordance with Articles 27 and 28 of the Petroleum (Local Content and Local Participation) Regulations, 2013 insurance must be obtained from an indigenous brokerage firm or where applicable, a reinsurance broker. Approval from the National Insurance Commission is required if insurance is to be obtained offshore, and it must ensure that the Ghanaian local capacity has been exhausted.

Modestus Anaesoronye