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To ensure effective take-off of the local content policy in oil and gas insurance, government has approved “consortium bidding” for indigenous insurance companies. This will enable operators muster the required financial capacity needed to play in the oil and gas sector that is dominated by foreign underwriters and brokers.
The initial guideline had scrapped consortium bidding by insurance companies, making it difficult for players in the sector to win prequalification bids. According to industry statistics, the insurance sector is loosing about N50 billion in oil and gas business as a result of capital flight.
But with the desire to help the insurance industry achieve its projected 40 percent local content policy beginning from 2007 and 70 percent by 2010, government was said to have approved the consortium bidding.
BusinessDay gathered that the new guideline has been released to the industry players through the National Insurance Commission (NAICOM).
Wole Oshin, chairman, Nigerian Insurers Association (NIA), who confirmed this said it was the expectation of the industry that the approval for consortium bidding will help in the realisation of the local content mandate.
The Nigerian National Petroleum Corporation (NNPC) had in a third quarter of 2008 advertorial called for pre qualification bid for its oil and aviation insurance for 2009, outlining the conditions for qualification to include a registered insurance company in Nigeria having a net asset of not less than N5 billion as per its latest published accounts.
This advertorial which did not regard consortium bidding attracted a lot of negative reaction from industry players, questioning why a government agency should put up such a strict condition.
BusinessDay investigations showed that going by the 2007 accounts of the insurance companies less than four out of the 41 insurance companies registered for general business were qualified to bid.
An insurance chief executive who preferred not to be named said that by its conditions for qualification, NNPC had strategically discouraged local underwriters from participating in the business. The source said that NNPC is only setting a bad precedence which can easily be copied by multinationals that have for a long time ignored local insurers to the benefit of their foreign allies.
Jacob Erhabor, managing director, International Energy Insurance plc, said that the environment has not been right for operators to explore the opportunities provided by the local content policy.
He noted that the industry players are studying the new guidelines to see how it can be applied to the benefit of the industry and the economy at large.