As oil prices continue the free falls in the international market, Nigerian insurers are worried that the economy continues to lose more of its scarce foreign exchange earnings through the outsourcing of energy risks to foreign companies.
Under the Nigerian Content law, oil and gas business operators in the country are required to ensure that local insurers insure at least 70 per cent of their risks and the rest can be insured abroad.
Against this backdrop, the Group Managing Director, Standard Alliance Insurance Plc, Mr. Bode Akinboye, has charged the National Insurance Commission, NAICOM, to stop the practice where oil and gas insurance risks are still being ceded abroad to foreign insurers by local insurance companies.
Akinboye, stated that the perpetrators of the act hide under the excuse of lack of domestic capacity to underwrite such risks to continue with the practice, with attendant capital flight from the economy.
He said: “Sincerely speaking, NAICOM needs to look at this area critically because what we are experiencing today is that under the local content, businesses are shared to local companies but indirectly some companies cede theirs to companies abroad under the guise that there is no capacity. Is that really local content? What is the definition of capacity?
Akinboye also argued that NAICOM need to address the issue to ensure that local content is really local and not the way it is being done. He added, “A situation whereby local retention is ceded and is further reinsured and more than 50 per cent is taken abroad makes nonsense of the whole local content policy. I think that if we have started something for the past five years, capacity ought to have been enhanced reasonable and not the same lack of capacity mantra that we have been hearing year in, year out. When are we going to have the capacity?
Rather than keep pining over the lack of in-country capacity, he urged operators to make conscious efforts to boost this, saying, “Perhaps we need to think inwards and create the capacity ourselves. This is an issue that requires proper engagement with all stakeholders. When there is more positive engagement then we will see some changes in the industry.”
While stressing that capacity should not be an issue, Akinboye noted, “Capacity is a mechanism and if we are creative enough, we can create the mechanism and we can specify where we are going to start, and at which point it will take off. So, all the capacity that we are talking about worldwide today started from somewhere. The question is, how are we addressing ours in Nigeria? Is it the right way? The answer is no. But we can do it in a better way.