ROSEMARY ONUOHA

International oil companies in Nigeria, IOCs, have been accused of refusing local insurance companies the opportunity to cover their risks under the guise that the local underwriters don’t have international credit ratings.

Consequently, these companies still take their oil and gas risks abroad even when the Local Content Act stipulates otherwise.

Mrs. Justina Omekere, an insurance practitioner who made the allegation in Lagos, lamented that with such actions the oil majors have continued to disregard the laws of Nigeria, thereby depriving local insurers’ the opportunity to expand their human and financial capacity.

In order to guard against the spread of this ugly trend, Omekere charged underwriters to subject themselves to international credit ratings to stop the oil majors from using such cheap blackmail to deprive them of what is rightfully theirs as well as saving the country from the incidence of capital flight.

In her words, “The oil majors always demand for credit rating from us before they can insure their risks. In essence, underwriters should avail themselves to be rated by credible rating agencies so that they will not continue to lose business.”

Meanwhile, the former Director General of the Nigeria Insurers Association, NIA, Mr. Ezekiel Chiejina, added that in line with being rated, underwriters should also do a lot of reinsurance in special risk business if they wish to play big in the oil and gas sector.

According to him, underwriters should enter into reinsurance treaties with ‘A’ rated international companies to further increase their ability to underwrite special risks.

Chiejina noted that special risk business is highly capital intensive, as such, insurers should ensure that adequate reinsurance is in place because adequate reinsurance is imperative for underwriting companies to pay claims promptly when and where the need arises.

The former NIA DG advised insurance operators to effectively use coinsurance to pull capital and develop relevant skills such that pricing of risks could be done in Nigeria. He added that they should avoid unhealthy competition that erodes the potential profitability of the companies to participate in the sector.

Chiejina stressed that every oil and gas risk underwriting business must be insured to a Nigerian company for them to take what they can cover, then cede the rest to a captive company, adding that insurers are over exposing their account if they take too much of these special risks and exposing clients unnecessarily.