Thursday, 12 August 2010 00:00 By Joshua Nse

 

THE National Insurance Commission (NAICOM) and other stakeholders will today (Thursday) gather in Lagos to deliberate on the modalities for the implementation of the Nigerian Oil and Gas Industry Content Development Act recently signed into law by President Goodluck Jonathan.
The one day seminar organised by the Commission will discuss ways and means of achieving the objectives of the Act, which is to enable Nigerians develop and maximise the potentials for local companies’ participation in the provision of insurance coverage, which before now was purchased abroad by the multinational oil companies operating in the country.

Guest speaker at the seminar will be Mr. Jonathan Raven, a Senior Vice President with Marsh Energy Practice, London. Raven, who has vast experience in the area of oil and gas insurance and implementation of local content, will speak on the topic “Implementation of Nigeria Content Act 2010: Lessons from practice and experience in other jurisdiction”.

The Commissioner for Insurance, Mr. Fola Daniel, commenting on the new law, said that it will strengthen the provision of the Insurance Act 2003, which provides that all property located in Nigeria whether moveable or immoveable or any insurable interest or liability in relation thereto shall be insured with a local insurer who may reinsure such liability or property overseas where the Nigerian insurance industry lacks the capacity to retain the risk.

According to him, “It is mandatory that all insured risks in the oil and gas sector be placed 100 per cent with Nigerian registered and domiciled insurance companies.

“Where any risk cannot be placed with a local insurer or reinsurer, the Commission may, in writing, permit such person to affect such insurance or reinsurance with an insurer or reinsurer registered outside Nigeria”.

Daniel explained that “NAICOM would ensure that any insurer or reinsurer who wants to participate in insurance of oil and gas risks meets and enhance their capital base beyond the minimum requirement to ensure the benefit of government desire for higher market retention and acquire adequate and valid reinsurance from reputable institutions. Also, the underwriting firms must have a proper skill acquisition programme in oil and gas through a deliberate policy of staff training and exposure, companies are also encouraged to submit self for rating by international rating agency.

According to the NAICOM boss, the Commission would ensure maximum utilisation of available local capacity before any approval is granted for placement aboard, and would also ensure market discipline in the transaction of oil and gas risks, as well as enforce sanctions against companies failing to promptly discharge their contractual obligations.

The Chairman of the Nigerian Insurers Association (NIA), Mr. Olusola Ladipo-Ajayi, in his remark said, “It is mandatory that all insured risks in oil and gas sector be placed 100 per cent with Nigerian registered and domiciled insurance companies. We are very delighted that the local content bill has now become law. It is the best thing that has happened for the economy, the insurance industry and other service industry in the energy sector”.

Said he: “The new law is most significant because it was an issue detractors of the policy used to articulate argument that there was no law to regulate the local content policy in oil and gas sector”.

The NIA boss said that it is a huge area for greater security of the economy through participation and ownership of activities in the sector and more importantly, it will ensure that Nigerians are employed in key activities of the industry to enhance indigenous human capital development, adding that the policy is a challenge to commerce and industry in Nigeria, we commend NAICOM for this initiative on enforcement.

Mr. Dan Okehi, a consultant and chairman, Brickred Consult Limited commended NAICOM for the move to implement the local content law in the oil and gas sector.

He said that it is important to indicate that the local content or Nigeria content policy of government is not about domestication of business in the energy sector as was the case with the indigenisation decree of 1976, which allowed Nigerians to take over ownership up to 60 per cent of companies from foreigners, but is all about domiciliation.

 

The domiciliation spirit is all about collaboration by weaker domestic stakeholders with stronger foreign associates that can help in building the required capacity in the country. The domiciliation principle is akin to the reinsurance principle of insurance and the Nigerian insurance industry should be allowed to float it in the international market.

 

Source:Guardian