Calls for higher capitalisation
The 12th Champion Insurance Day/Luncheon which held in Lagos last Tuesday, November 11, 2008 maintained the tradition of the annual event as it succeeded in generating news ideas amidst policy directions for the larger Nigerias insurance landscape.
With renewed insurance managers, administrator, educationists and consumers converging at the Ikeja Sheraton Hotel and towers venue of the interactive session, the 12th edition of the champion Insurance day/Luncheon held out refreshing platform for the deepening of stakeholders interests.
Two former commissioners of insurance in the persons of Chief Eugene Okwor, and Chief Emmanuel Okechukwu Chukwulozie, the current insurance commissioner Mr. Fola Daniel, former minister of information Prince Tony Momoh, Group General Manager (GGM) in charge of insurance matters at the Nigerian National Petroleum Corporation (NNPC) Mr. Ayo Bammeke, Chairman of the Nigerian Council of Registered Insurance Brokers (NCRIB) Chief Dede Ijere, chief Ogala Osoka, Mr. Dolapo Balogun, Barr. (Mrs.) Laide Osijor, Dr. Remi Alo among a host of other top industry notcher had reasons to light up discussions at this years Champion Insurance Day/Luncheon which had as its theme “Local content development in Nigerias oil and gas industry-the insurance perspective”.
“The oil and gas industry makes at least 90 to 95 per cent contribution to the national economy. It is the king of our economy. If you are in any sector that dose not get its own share of the oil and gas in this country, then, that sector or the industry is not worth it. It shouldnt exist. The premium income that we are expecting from the oil and gas sector is quite huge. The consolidated insurance package (of the NNPC) is quite a lot. It may be true that wee do not have enough capacity, but we will begin on day to build the capacity. The impact of this lecture series in the past 12 years has been quite positive. In a way, the lecture has been able to add its own proportion to capacity building in the industry” And that was Chief Chukwulozie speaking at the event.
The applause which greeted the choice of the topic was in no where near the commendations which followed the actual presentation considering the far reaching postulations and recommendations which trailed there from.
The guest lecturer who is the Group Managing Director (GMD) of NNPC Eng. Abubakar YarAdua had no reason to disappoint his audience considering that he willing fully accepted to lead the discussions after weighing the possible implications of not accepting to talk at such an elitist forum.
But what Eng. Abubakar came up with appeared to be diametrically opposite to what the insurance industry operators had looked forward to hearing him say.
Considering that many of the practitioners have continued to abhor the system where the NNPC would put insurance companies on what they termed beauty parade for the purpose of choosing the firms to handle its insurance needs, the insurance mangers had besieged the Ikeja Sheraton Hotel venue of the lecture wanting to hear the chief executive of the oil giant soft landing measures to securing oil accounts.
But no. Eng. YarAdua had rather insisted on indigenous companies working hard to bench mark the best insurance companies in the world saying that there are no reasons for Nigerian firms to be pitied under the cover of business protection.
Group Managing Director NNPC had therefore advocated further recapitalization of insurance companies in Nigeria.
Already, each of 48 Nigerian insurance companies have recapitalized to a minimum of N3 billion for non-life insurance and N2 billion for life insurance.
But Engr YarAdua, who spoke through the Group General Manager, Insurance of the NNPC, Mr. Ayo Bammeke, declared at the 12th Champion Insurance Day/ Luncheon that such recapitalization would make the companies to meet global challenges.
The GMD, who urged the insurance companies to adopt a risk-based recapitalization, where they should create separate balance sheet for each class of insurance business said the oil and gas risk exposures amounts to N11 trillion with a corresponding premium of $22 million, even as he said that about 33 per cent of the amount is retained in Nigeria.
While observing that the recently-concluded recapitalization of insurance companies in Nigeria is a step in the right direction, the GMD said the net assets of 40 recapitalized insurance companies in Nigeria as at December 2007 stood at $1.5 billion ,about N177 billion.
“NNPC oil assets have a maximum probable loss of $1 billion with underlying sum insured of 32 billion, excluding well and third party”, he stated while maintaining that about 42.5 per cent of the NNPCs Consolidated Insurance Programme was retained in Nigeria in 2007; 52.5 per cent in 2008.
He noted that the industry must be commended for the efforts in the past three years in terms of training of employees to acquire competence in oil and gas underwriting, adding that statistics, which indicate that risk exposure level is about 5-10 per cent of the net asset could be used to support a class of business.
On local content policy, he noted the desired milestones is expected to hit 70 per cent by the year 2010 even as he said about 45 per cent was achieved in 2006.
According to him, the Nigerian content policy is applicable to all operations, including engineering, fabrication, banking and insurance, shipping and marine, exploration as well as logistics and services.
Nigerian content is a quantum of composite value created in the Nigerian economy through the utilization of Nigerian human and material resources for the provision of goods and services to the petroleum industry within acceptable quality, health, safety and environmental standards in order to stimulate the development of indigenous capabilities