By Sunday Ojeme Friday, 27 Aug 2010 

 

The controversy generated by the alleged premium inflation at the Nigerian National Petroleum Corporation has refused to thaw as experts opposed to the charged premium insist that it is high.Restating his position on the matter on Wednesday, an oil and gas insurance consultant to the National Insurance Commission, Mr. Dan Okehi, said that the premium paid out by the Corporation to underwriters within a period of 10 years covering between 2001 and 2010 could be obtained at 60 per cent less.

 

In the past few weeks, some experts in the insurance industry had faulted the $363m premium paid to the underwriters by the NNPC within the period. They argued that the amount charged was rather too high considering the fact that the natural disasters used as defence by the NNPC had no bearing on Nigeria.

 

The NNPC had blamed the September 11, 2001 terror attack on the World Trade Centre in the United States, as well as the tsunami for the sudden rise in insurance premium.Okehi, who spoke with our correspondent on the telephone, said that the argument that the fear of natural disaster necessitated the increase was not tenable since the Nigerian environment had been fairly stable.In one instance, the premium was reported to have experienced astronomical increase within a year from $16m to $51m.

 

Prior to 2001, $9.6m was paid as premium in year 2000. The amount suddenly shot up to $16m in 2001 and $51m in 2002. Although it fell to $48m in 2003, $44m in 2004 and $42.5m in 2005, it, however, went up again in 2006 when it hit $57m. In 2008, the premium, which hit $53m, came down to $49m in 2009 but rose again to $53m in the current year, 2010.Proffering an expert view to the controversy, the Chairman of the Nigerian Insurer Association, Mr. Olusola Oladipo-Ajayi, however, faulted those who believe that the premium was inflated, saying that it could not be true. He said members of the association should not be blamed for whatever premium charged since it was usually decided at the international market.

 

Ajayi said those who made the allegation did not give intelligent and technical reasons to establish it, adding that in as much as the NIA was not defending the NNPC, it had a responsibility to give an opinion and enlightenment to the general public on how insurance worked.According to him, ”I do not agree that NNPC premium was inflated at any time. Those who raised the allegation should tell the public more on how they arrived at it. In doing that, they should consider factors that determine pricing of such class of risks like probability of loss and the total amount of liability that may arise in the event of a loss.

 

”Others are the level of safety mechanism in place, reactions of the global insurance market to a particular risk in a given period and claims clauses among others.”But Okehi, however, told our correspondent that, ”The premium charged could be obtained at 60 per cent of what is currently being paid on the oil side. It is true that premium is not stable, but the Nigerian environment is stable and not prone to the attacks and disasters that prompted the high premium.

 

”Nigeria‘s risk basket cannot be compared to that of Gulf of Mexico. The international market looks at a lot of things before arriving at the premium to be charged. The risk basket of the NNPC is not adverse as to warrant what they charged.”

 

Source:Punch