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Nigerian Insurance industry does below 45% local content,Fin Insurance boss

Mallam Sallau Hamman, Managing Director /Chief   Executive     Office of Fin Insurance in this interview     with Patience Saghana     articulates insurance industry’s oil and gas business, the constraints and the opportunities.. He gives his candid view on the sector’s capacity to underwrite the big risks whilst he forecasts Fin Insurance’s position in the next five years.


Mallam Sallau Hamman

Being an oil and gas expert since your days in Nicon Insurance Corporation, what is your over view of oil and gas business in Nigeria?

As a student of  oil and gas, one will say without fear of being misquoted that oil and gas is a very wide field from seismic studies, through construction _ fabrication, installation, drilling, transportation, refining, distribution and storage of the commodity,  there are activities too numerous to mention in this specialised but highly capital intensive area in just a few words. Suffice to mention that presently it is the main stay of the Nigerian economy accounting for about 80 per cent of our revenue and more than 90 per cent of our foreign exchangearnings.

The Federal Government is the owner, importer, exporter, refinery operator, policy-maker, regulator and subsidy provider in this sector and by extension the Nigerian Economy. The Nigerian government has initiated some reform that is aimed at revitalisation of the sector through restructuring and divestment of  public sector assets to broaden private sector participation and redesigning, adequate staffing and re-sourcing of policy and oversight agencies.

Government has also been expanding the upstream activities, encouraging private sector participation, building capacity/reserves and improving transfer of upstream managerial and technical know-how to the Nigerian community and increased Nigerian capacity and content in the sector both directly, and as suppliers of goods and services through the Local/Nigerian content policy.

But the industry is still facing challenges especially in the area of adverse social and environmental impacts of upstream operations, sustainable clean physical environment, social equity, and an end to violence in the oil producing areas. There is the re occurring unending product imports in the downstream and the need to restoring export capacity.
There is the need to put an end to crude oil and petroleum products subsidies and significant efficiency gains through privatisation and expanded private sector participation in both existing and new refining capacity.
Apart from the infrastructural, environmental and processes factors the industry is bedevilled with moral hazards of an unimaginable proportions.

Monsters created in ‘anything goes’ syndrome such as Indiscipline, Inflation, Corruption, Interests (Spoil systems, Selfishness, Sycophancy etc.) amongst host of others are the bane of the industry.
The general public are at lost as to why the present Refineries and Petrochemical Plants are not operating to capacity.

A continuous pump price increment with promises that goes along with such increments, but what has government done with the money? Expenditures: _ Government has spent about N300 billion on roads with no visible motor able road(s) constructed; set aside N200 billion revolving Agricultural loan to farmers; no kobo released; N70billion Textile fund; no body smell the money etc, etc;. Implementation of policies; no workable system or blueprint on ground; Other sources of energy e.g. coal, wind, solar, nuclear, thermal etc; no attention is paid; Spoil system and restiveness in the oil producing areas _ Badly handled; Shortages are experienced not due to lack of infrastructure nor inadequate storage but are mostly attributable to subsidies that lead to smuggling on one hand and non functioning refineries on the other Yet Government has different security outfits in its employment;  The general public cannot get fuel, energy and/or power when they need it; And where it is available the cost of these (fuel/energy/power) is to say the least not competitive. The parliament is yet to pass the Petroleum Industry Bill, etc.

Government through the Ministry and agencies should start prioritizing projects and executing them to logical conclusion. Take gas for instance; apart from the billions of dollars the country is earning from the liquefied gas through the Nigeria Liquefied Natural Gas Company Limited, the country can change its fortune through ethane which is part of the gas being flared.

Do you think Nigerian insurance industry in all honesty; has the required capacity for the big risk business?
My honest assessment is we are trying to build capacity to underwrite some big risks notably the oil and gas risks.
Recently, we made an assessment of the industry’s perceived capacity in this area with particular reference to the Nigerian National Petroleum Corporation (NNPC) account; the industry could only underwrite 4 percent of the risk on total asset basis naira for naira. However on maximum probable loss basis we can accommodate the risk 100 percent.
The reinsurance companies are trying in supporting the industry with additional capacity. The industry is currently underwriting below the 45percent of the Nigerian/Local content policy of the Federal Government.
Is Nigerian insurance industry at fault on the speed of local content percentage or the federal government?
Neither is at fault. I think the problem lies with the capacity that is lacking in the insurance industry.

The Federal Government set a target of 45 percent by 2006 and 70 percent by 2010 for the Nigerian Local content for all sectors operating in the Nigerian Oil and Gas industry.

The insurance industry really has to speed up. We need to move five years in six months to catch up with the Nigerian Content policy of the Federal Government.

What can the industry do to speed up its growth rate?
Simple, let the insurance industry come together and build capacity to enable it benefit from the policy.
The difference between us and other participants in the Nigerian Local content is that we provide security and create conducive atmosphere for the industry to thrive. The industry will be comfortable if our individual or collective balance sheet(s) is(are) more efficient or better than the individual company or companies operating in the Oil and gas industry.

Accordingly, we should thrive to have a very strong balance sheet either individually or collectively to underwrite the risks of the industry.

Can Compulsory insurance enhance insurance industry growth?
Yes to some extent. But in the history of compulsory insurance in Nigeria, compliance is always a problem.
The Motor Vehicle Third Party enacted in 1945 is still at infancy level due to problems associated with enforcement and compliance.

It is gratifying to note however, that the National Insurance Commission is looking at the issue of enforcement and compliance with the establishment of the Insurance Market Development and Restructuring Initiative.
Are Nigerian insurance companies managing the big risks well enough?

The underwriting and claims settlement administration of risks are normally done by the lead underwriter with the active participation of the primary underwriter and to some extent other co insurers.

All the risks small and or big insured by the industry are being managed properly.
What are the constraints of the business?

There are a lot of challenges and both the industry and the supervisor are tackling them head on. We still need to fast track certain key issues for the collective good of the industry.

The industry need to improve on unity, self regulation and sharing risks that are above a particular underwriter.
The constrains of course include doing things right, discipline and working as a family which are still lacking
How far can you take Fin insurance?
As the Chief Executive Officer, l intend to drive the company to the top. The very topmost level, the echelon, the enviable first position not only in the Nigerian Insurance industry but in the Nigerian financial sub_sector of the economy

I hope to entrench commitment, discipline, professionalism and culture of hard work and excellence in Fin insurance.
To build a company whose employees will not only enjoy the fruits of their labour, but will love to work for in a very conducive and friendly atmosphere that would enable them to build a good career path.
What position is Fin insurance in the sector?

Currently, we are occupying the 38th position in terms of Gross Premium income.
The company is a striving hard to move up from the relatively medium size to top 10 in the country and by the grace of God, we will emerge as a leader in the industry in the next five years.

Where will you place Fin insurance in the next five years?
Fin Insurance will be among the companies to beat in terms of efficiency, effectiveness, responsiveness and underwriting expertise.

A highly capitalised company that will be able to carry the risk of the Oil and Gas industry
A repositioned company, composite insurer, conglomerate that is a major player not only in the financial sub_sector of the economy but in the area of healthcare, communication, transportation, real estate and tourism which is second to none in providing quality services to customers for the benefit of all stakeholders


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