Breaking News
Translate

Aiico, seven others hook onto N 2.3 bn NNPC Group Life for 2010

Eight insurance companies are hooked on to the 2010 Nigerian National Petroleum Corporation (NNPC) group life account for N 2.3 billion premium with sum insured of N 385.99 billion.

The 2010/2011 NNPC group life account is led by Aiico Insurance Plc with a proportion of 15 per cent. The other seven insurers that co_insured the NNPC group life are: Leadway Assurance Company; Guaranty Trust Assurance and Goldlink Insurance with 13 per cent proportions each; Zenith Insurance, Crystalife Insurance and Lasaco Assurance had 12 per cent a piece whilst Intercontinental Life Insurance had 10 per cent.

Section 9(3) of the Pension Act 2004 provides that employers shall maintain life insurance policy in favour of the employees for a minimum of three times the annual total emolument of the employees.

This is also in support of the government’s Local Content Policy which stipulates that at least 45 per cent of the businesses in oil and gas insurance, beginning from 2007 are retained locally, while this is expected to rise to 70 per cent by the year 2010.

Insurance Act 2003 also provides that all property located in Nigeria whether moveable or immoveable or any insurable interest or liability in relation thereto shall be insured with a local insurer who may reinsure such liability or property overseas where the Nigerian insurance industry lacks the capacity to retain the risk and this is no exception to oil and gas business.

Operators have been striving to reclaim their position in the underwriting of oil and gas businesses since the successful recapitalisation exercise in the insurance industry, and this has become a challenge to the industry regulatory authority, the National Insurance Commission (NAICOM) which is striving to ensure that local market takes its fare share of oil and gas insurance business.

Though, the corporation’s group life account had over the years not been profitable to insurance companies as a result of huge claims arising from it which often do not commensurate with the premium charged, from a 10.6 per mille that insurers were supposed to insist on, they are left with no choice than to make do with 6.0 per mille whereas the premium ordinarily should be reviewed upward every year as a result of  increase in Age and Salary of NNPC’s employees

The trend in the loss ratio, according to Vanguard findings, was attributed to poor risk management by the insurance operators, which has underestimated underwriting principles arising from unhealthy competition to grab the oil and business account.

account
The figure showed that the corporation paid N 351.7 million as premium in 2002 and made claims valued at N 451.9 million, showing a loss ratio 128.59 per cent. In 2003, the figure worsened with a loss ratio of 206.34 per cent, as N 362.6 million premiums was paid while claims worth N 748.15 million was settled.

The insurance industry in 2005 collected as premium  N 143 million as against a claims figure of N 591 .1 million, showing a loss ratio of 413.3 per cent. The financial year 2007 was not favourable for the insurers as they paid out N 1.1 billion in claims against N 995.4 million, indicating a loss ratio of 108.6 per cent.

Cumulatively, insurers say the loss ratio of the policy has averaged 200 per cent in the past six years. But the huge loss was discovered last year when an insurer who won the bid for 2008 cover found out in the historical and loss analysis of the policy that the portfolio has been unprofitable for some time though 2009 account handled by Goldlink Insurance Plc was not as bad as the past years.

Mr Ayo Bammeke, the corporation’s insurance head had affirmed to Vanguard that it was not the fault of NNPC  if prices charged by suppliers of a service are not sufficient to cover costs and realise profit. “I work for NNPC and my responsibility is to ensure that it gets the best in any bargain. If any insurer comes forward to convince us with figures that our portfolio is not good enough, we will listen to them and agree on new terms,” Bammeke told Vanguard in Abuja last week.

The insurance manager denounced the attitude of some insurers in their bid to win business but said, “They must learn to take responsibility” for the problems that they create. One of the market’s most outspoken CEO who craved anonymity in this respect told Vanguard that indeed they found themselves in the scandalous huge loss on the policy because of the “unhealthy premium appetite of our colleagues.” Unless they compel NNPC to review the price, the insurer will incur losses from the onset of the programme, he stated.


Disclaimer

Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.