By Rosemary ONUOHA

As part of efforts to curb capital flight, the need for increased capacity on the part of Nigerian insurers have become a subject of concern in order  to effectively underwrite risks associated with oil and gas 100 per cent.

The situation whereby some insurance companies serve as conduit pipe for transferring local oil and gas risks to international market, according to operators, is not wholesome.

Managing Director of Niger Insurance Plc, Mr. Justus Uranta ,who made the assertion to SWEETCRUDE, noted that the local content initiative started with 10 per cent involvement and climbed to 40 per cent and the intent is for it to go up to 70 per cent in the future, adding “We hope that it will get to 100 per cent.”

Uranta said that the initiative is a policy that government instituted to encourage local operators and not only the insurance industry.

He said “What that does is that it has forced the local market to absorb increased capacity and also made us sit up in terms of improving our capital base because if your capital base is low, you cannot participate in the local content policy.”

“If you are maybe in marine business where you are not directly faced with mitigating a loss, perhaps the scenario may be different ,but because of the nature of our business, whereby we are in a position where we have to meet a claim when a loss occurs, then we must be sure that our capacity is sufficient to carry such risks that have been bestowed on us.”

Uranta therefore urged underwriters to continuously review and improve on their retention capacity to be able to take advantage of the local content exposure.

Meanwhile amidst fears in some quarters that claims emanating from oil and gas risks have been huge and could impact negatively on the bottom-line of insurers, some operators are of the opinion that the business still remains a worthwhile venture.

For Managing Director of Crystalife Assurance Plc ,Mrs. Oluseyi Ifaturoti with adequate re-insurance, oil and gas risk can be effectively managed.

It will be recalled that the optimism and momentum that started with the local content project on insurance of oil and gas started declining as a result of quick maturation of risks and subsequent claims emanating from the accessed risks.

As a result of the risks crystallizing earlier than expected, players are beginning to exercise caution so that they do not burn their fingers which could possibly affect shareholders’ fund.

However, Ifaturoti was of the opinion that the oil and gas business is still worthwhile because there is still a lot of premium to be earned since the re-insurance mechanism is here to spread the risk so that they are not over exposed.

She said “Even the owners of the risk want to see your re-insurance programme for their risks to be sure that when a claim crystallizes, you have set in motion machinery that will ensure that their claims are settled.”

For Managing Director of Consolidated Hallmark Insurance plc, Mr. Eddie Efekoha, the insurance industry needs a firmer and stronger oil and gas insurance pool arrangement.

Efekoha said that the pool arrangement is necessary to help the market have a bigger bite of the businesses coming from the oil and gas sector.

Efekoha said that the first pool should be the initiation of the National Insurance Commission, NAICOM,  and the second coming by way of some operators coming together in a kind of syndicate arrangement that would not be initiated by either NAICOM or the Nigerian Insurers Association, NIA.

Efekoha however commended the effort of NAICOM in policing and ensuring that the local content is enforced adding that the oil industry was supposed to maintain the momentum that started with the local content project. According to him, this could not be, because there has been a little bit of caution due to the few incidents that have happened so far because the claims emanating from those incidents, no matter how small they were, are huge in terms of amount.