By Patience Saghana
Attempts made by some members of the Nigerian Oil and Energy Insurance Pool (NOEIP) to dissolve the pool nine years after nine years of its existence was bungled by some other members of the pool.
Vanguard gathered that some members of the pool had on three occasions pushed for dissolution of the pool on the grounds that it no longer served its purpose of attracting patronage from the energy industry but the attempts to dissolve the pool was thwarted by other members of the pool who are still nursing the hope on the actualization of the aim of NOEIP.
The pool was floated by some insurance companies to improve capacity of insurance companies in writing oil and gas business but its takeoff had been continuously frustrated by both internal and external conflicts including the multinationals that have refused to cede business to the pool
Membership of the pool started in 1999. As at 30th April 2000, the Pool has 14 members with a deposit of US$975,000.00 representing 39 Lines. Membership of the pool grew from 17 as at April 2001 with a deposit of US$1,350million approximately 54 lines to 26 members as at 30th April 2002 with a total deposit of US$1,6million or 64 lines.
The membership increased to 27 as at April 2003 with a total deposit of US$1,95million or 78 lines and by November 2003, the list went up to 35 with a total deposit of US$2, 225m representing 89 Lines. As at December 2004, there are 51 members with US$2, 975million or 119 lines. Post recapitalization membership stood at 27 with total number of lines reduced to 85 lines. But currently the NOEIP has 23 members with number of lines at 79.
Insurance companies that are members of the pool screeching for withdrawal from NOEIP are: Consolidated Hallmark; LASACO Assurance Plc; Leadway Assurance Co. Ltd; Prestige Assurance Plc; Regency Alliance; Sterling Assurance; Law union & Rock; Nigeria Agricultural Insurance Corporation and Oasis Insurance Plc
The withdrawal of some of the members of the pool had further weakened the pool as the remaining companies are seriously considering taking out their contribution and thus signaling the intention to collapse the pool.
Out of the Nigerian oil and gas risks exposure amounting to $101.14 billion (about N11 trillion), about $33 billion, representing 33 is being retained by the indigenous insurance companies, according to Nigerian National Petroleum Corporation.
As the premium payable on these oil and gas risks amounted to $224 million, the nation’s insurance industry loses $151 million (about N16.1 billion) since only 33 per cent of the risks amounting to $33 billion risk exposure is retained in the country.
Recapitalisation of the insurance industry resulted in the increase in the net assets of the 40 companies operating in the country to N177 billion ($1.5 billion) as at December 2007,Â and with a market capitalization of N670billion as at December 2008 yet NNPC insists that local market capacity is still relatively low.
NNPC oil assets, he noted have MPL of $1billion with underlying sums insured of $32 billion excluding well and third party, pointing out that only 42.5 per cent of the NNPC Consolidated Insurance Programme was retained in the country in 2007 and 52.5 per cent in 2008.
Thus, NNPC recommended that the insurance industry should adopt risk based capitalization by creating separate balance sheet for each class of the business.
Meanwhile, Minister of State for Finance, Mr. Remi Babalola had lamented that substantial part of the risks emanating from the nation’s oil and gas industry are still being underwritten by foreign insurance companies.
Babalola stated that the local insurance industry is being confronted with all manner of hurdles preventing it from fully participating in oil and gas insurance.
While the government has set a local content target of 45 per cent in 2006 and 70 per cent in 2010, the minister said even though the country has recorded appreciable progress in other areas, the performance of the insurance industry in this initiative has been dismal.
The overall aim of the local content policy of the Federal Government in the energy sector is to enable Nigerians develop and maximize the potentials for local companies participating in the business of the sector.
He therefore charged operators in the local insurance industry to rise up to the occasion by building capacity to underwrite the energy risks, while also undertaking a major review of their operations.
Mr. Fola Daniel, the nation’s commissioner for insurance who gave the advice in Lagos last week had regretted that the structure of the oil and gas insurance is such that it is difficult for most insurance companies to win accounts on standalone basis.
According to him, the demand for consolidated accounts of companies as precondition for listing as possible oil and gas underwriters is almost impossible for companies to comply with hence the need to form consortiums.
The commissioner’s challenge came on the heels of the declaration by the membership of the Nigerian Energy Insurance Consortium that it does not intend to operate as a cartel.