By Ifeanyi Ugwuadu & Chika Akunne
The current practice in local content energy business has been faulted on the grounds that it robs indigenous players of playing key role in the channeling of the placements. The proper routing of the businesses will empower insurers to play decisive role in the process.
Managing Director of FBN Insurance brokers, one of Nigeriaâ€™s leading brokers, Mr Val Ojumah said local content in the energy insurance business as practiced today is not beneficial to the country as the subsisting routing of the process raises the cost of insurance. Currently, the way itâ€™s going now involves â€œthe reinsurance broker through a lead underwriter outside bringing the risk into Nigeria.â€
Reviewing the state of energy business in Nigeria, Ojumah declared â€œI have not seen any change in the state of energy insurance in Nigeria. Looking at it practically, the sources of energy insurance in Nigeria are several. Number one is the government through NNPC and NAPIMS.Â Number two is the multi-nationals and finally private producers excluding the oil services companies. For NNPC and NAPIMS, nothing has changed,â€ he concluded
This channeling, according to Ojumah is informed by the leading role played by captives of multinationals oil companies in the country who use their own insurance companies (captives) to execute their insurance business in the country.
â€œThe reason is that multinationals have interests in captives not registered in Nigeria.Â So, they use insurance companies registered in Nigeria as either fronts or those companies take a proportion of the risks and the proportion they cannot take, they transfer abroad. This represents the concept of local content as initiated by the federal government.â€
This process, Ojumah stated keeps the business overseas and allows foreign players to dictate the business process and terms for local players. But he noted that if local content is aimed at empowering local players, it has failed to produce results as the old system has been transferred.
Ojumah explained thatÂ â€œjoint venture projects, which is between NNPC and the multinationals, the insurance go through NAPIMS and follow the same system; the same market, the same primary underwriters following the same method of taking in what they can and shipping out the excess.â€
He said much money is being wasted in what Nigerian brokers can best do than their foreign counterparts. â€œWhat the reinsurance brokers are doing abroad, there are a thousand insurance brokers in Nigeria who can do essentially the same if not betterâ€, he claimed in an exclusive interview with Vanguard.
To fashion a system that works as a local content in concept, the CEO wants Nigerian brokersâ€™ participation to be on production basis so they can then choose international partners to work with. â€œLet Nigerian brokers be the producing brokers which means they will originate the business. Thereafter, let them choose any placing brokers they wish to work with anywhere in the world,â€ he stressed.