Dangote Refinery, which has insured value estimated at $6.8 billion, is likely to be taken over by foreign insurers when it becomes operational. Local insurers may also lose an additional $8 billion energy insurance business from energy companies to foreign insurers.
The reason: The projected loss is as a result of insurance firms’ current low capital base and lack of underwriting technical capacity.
According to the Director, Policy and Regulation, National Insurance Commission (NAICOM), Pius Agboola, the Nigerian insurance sector had continued to lose a substantial part of the income that was supposed to grow the industry to their foreign counterparts due to low capital base.
Energy sector insurances: Agboola hinted that among the quantum of businesses currently approved in principle by NAICOM to be taken abroad were aviation refuelling liability insurance from 11Plc (former Mobil Oil Nigeria Plc) with the sum insured valued at $1 billion.
Agboola said it is regretful that of the above-stated amount, the local insurers had the capacity to insure only 10.03%, while 89.97% would be ceded to foreign insurers from mainly European and American markets.
Similarly, the insurance sector is losing another risk valued at around $7 million, being the sum insured on Third Party Nuclear Liability Insurance from Centre for Energy Research and Training (CERT) in which indigenous insurers have the capacity to insure only 0.05% of the entire business, while 99.95% would be taken abroad.
More so, the Combined Property Damage/Machinery Breakdown/Liability Terrorism/Political Violence Risk, belonging to Sahara Power (Egbin Power Plc), with the insured sum valued at $3.1 billion would have 53% insured abroad, while 46.295% would be insured locally.
According to the insurance sector regulator, the Nigerian National Petroleum Corporation (NNPC) retained 78% of its Consolidated Insurance package risk valued around N99.5 billion as the sum insured with local insurers, while 22% was taken abroad.
Also, Chevron Nigeria Limited insured 75% of its Energy Package Risk valued at N14.3 billion with indigenous insurers while 25% is taken abroad; just as Mobil Producing Nigeria Limited insures 70% of its Energy package/physical damage and O.E.E valued at $14 billion with local insurers while 30% was taken abroad.
Lafarge Hoicim insured 68.73% of combined property damage/business interruption and public liability, valued at over $564 billion as the sum insured with local insurers while 31.27% was taken abroad. Dangote Fertiliser insured 60% of its Construction/Erection All Risk and third-party liability risk valued at $1.128 billion with local underwriters.
While the insurance sector regulator had fixed Tuesday, August 20, 2019 as deadline for operators to submit their recapitalization plans, the Acting Commissioner for Insurance, Sunday Thomas, was quoted to have said NAICOM would “prosecute as never before, the recapitalization process of insurance companies to ensure that the sector is positioned to support economic development of the country.”