The ongoing recapitalisation in the insurance industry targets to close the widening gap in the retention capacity of local insurers, which has lead to huge premium flight into the international market.
Experts say the ceding of premium to international market was as result of both financial and technical capacity shortages within the local market, particularly in the oil and gas, and energy sector risks.
Pius Agbola, said the capital base of an underwriter is of great importance in determining how much risks it can retain.
He noted that a large proportion of the local risks are presently ceded outside because of low retention capacity.
According to him, NAICOM has continued to Approve in Principles (AIP) requests to allow risks that should have been retained locally taken abroad over low capacity.
I believe strongly that the increase in capital base would definitely increase retention capacity of the underwriters, he said.
In a table recently released by NAICOM showing the retention capacity of local underwriters and what was ceded abroad, it was revealed that out of an estimated N64.59 trillion naira ‘sum assured’ in oil and gas, and energy risks generated from Nigeria, N16.90 trillion were ceded abroad, while about N37.69 trillion were retained locally.
The sum insured is the amount of money that an insurance company is obligated to cover in the event of a covered loss. The amount is dependent on the premium price paid for the insurance coverage.
The breakdown shows that NNPC’s consolidated insurance package with $99.58 billion sum insured, was shared at 78 per cent locally and 22 per cent abroad, amounting to $77.67 billion (local) and $21.91 billion (abroad) respectively.
Chevron Nigeria Limited, energy package insurance, sum insured of $14.31 billion, was shared local $10.73 billion, foreign $3.57 billion; Mobil Production Nigeria Limited, energy package/Physical Damage and O.E.E, sum insured, $14.09 billion, local, $9.86 billion, foreign $4.23 billion; Lafarge HOICIM, Combined property damage/business interruption and public liability, sum insured, $564.88 billion, local intake, $388.24 billion, foreign $176.64 billion.
Dangote Fertilizer, Construction/Erection, all risks and third party liability, sum insured, $1.12 billion, local, $0.672 billion, foreign, $0.44 billion; Sahara Power (Egbin Power Plc) (Combined Property Damage/Machinery Breakdown/Liability Terrorism/Political Violence cover Policy $3.17billion; $1.43billion locally, $1.74billion foreign.
Yinson Production (Energy Package, War and Terrorism Inclusive) having $1.24billion sum insured was shared $484.8 million local and $715.2 million foreign. StarDeep Water Petroleum Limited (Energy Package) sum insured $3 billion, distributed as $2.25 billion local and $750 million foreign.
Dangote Refinery (Construction/Erection All Risks, Third party Liability, Owners Plant Delay in Startups) with sum assured of $6.7 billion, and distributed as $1.54 billion for local market and $5.16 billion to foreign market.
Aviation Refueling, refueling liability insurance) with sum assured of $1 billion; $103million local and $897 million foreign; and Centre for Energy Research and Trainings Affiliated to Ahmadu Bello University ( Third Party Nuclear Liability Insurance sum assured $7.01billion; $3.01million local and $6.97 billion foreign.
Modestus Anaesoronye
