As Nigerian insurance companies continue to struggle with low capacity in underwriting oil and gas risks, about N128.3 billion worth of premium from the sector was transferred to reinsurers and foreign insurance companies in the first nine months of this year.
Vanguard findings from the National Insurance Commission, NAICOM, data show that in the third quarter of 2022, Q3’22, while total oil and gas premium was N95.9 billion, N60.5 billion was ceded to foreign insurers, as local insurers retained only N35.4 billion.
In Q2’22, oil and gas premium income was N71.2 billion. Nigerian insurance companies ceded N42.6 billion to foreign counterparts and retained only N28.6 billion.
In Q1’22, oil and gas premium income was N50.2 billion. The local insurers ceded N25.2 billion and retained N25 billion.
It will be recalled that the federal government had set a target of 70 per cent local content for underwriting of oil and gas risks, implying that 70 percent of all insurance risks associated with oil and gas business including prospecting, exploration, drilling, constructions, shipping, distribution, marketing, and transportation are to be insured in Nigeria with registered Nigerian insurance companies.
However, energy risks are still substantially insured abroad due to low capacity in the local insurance industry.
Speaking on the situation, Deputy Managing Director, Technical of Anchor Insurance, Mr. Adebisi Ikuomola, said that in response to the high level of premium export emanating largely from oil and gas related risks, Nigeria use laws and regulations to drive local participation through graduated domestication of these insurances.
However, there is still a long way to go.
He stated: “Despite the local content laws and regulations established in Nigeria, insurance companies are yet to fully take advantage of the opportunity to effectively position themselves as major players capable of leading foreign firms in the underwriting of oil and gas business.
“The mandates to companies in the upstream petroleum sector to cede their insurance business to local insurers, is in line with efforts to maximise the participation of local insurance companies in the oil and gas sector.”