By Nike Popoola Tuesday, 5 Oct 2010

Following allegations that the Nigerian National Petroleum Corporation paid over $368.8m in excess premium to its insurers, the Federal Government has said that it will henceforth impose tougher rules on insurance companies that wish to do business with the national oil company.

The Commissioner for Insurance, who is also the Special Adviser to the Federal Government on Insurance Matters, Mr. Fola Daniel, who disclosed this in an exclusive interview with our correspondent, also said that the National Insurance Commission was investigating the alleged excess premium payment by the corporation.

He said that as the time for the renewal of the NNPC insurance policy was getting nearer, companies should not think of doing business with the corporation with inappropriate rates because bidders would be invited to quote ”in an appropriate and transparent manner.”

It had been alleged that between 2001 and 2010, NNPC paid inflated premium of $368.8m to its insurers. However, the Nigerian Insurers Association has denied its members’ involvement in the deal.

The association said that the rate for oil and gas cover could not have been determined in the country because local insurers took only about 43 per cent of the corporation‘s risks as at 2010

The commissioner, nevertheless, noted that when the allegation was made, NAICOM wrote to those involved in the deal, including the lead broker, NNPC, consultants to the corporation on the deal and the newspaper that broke the story.

He added that all the parties contacted had responded and that the commission was following up on their responses.

The NAICOM boss said that because of its interest in the matter and the need to ensure that it got a fair deal, the government showed keen interest in the allegation, insisting that it would take necessary action against parties found culpable, if the allegation was confirmed to be true.

Daniel said, ”We are studying it, we are not dismissing it, and if we come to any fact pointing to the fact that the government had been ripped off, we will act as appropriate. We are showing interest in protecting government‘s assets.”

He explained that oil and gas insurance rates were not being determined in the country because Nigeria lacked the capacity to take most of the risks.

The allegation of premium loading, he added, used to be a Nigerian factor in the past but wondered how such could ever get to the international scene.

According to him, ”In the London market, it is almost impossible to write in a premium of $100m and go back to the syndicate and ask them to give you half of the money back. If it is not possible in the London market, I wonder why anyone will be asking that the premium was loaded, notwithstanding, we are investigating the allegation.”

The NAICOM boss, however, said that the commission did not have the right to say that the premium charged was too much, because it could not put a price on transactions.

While hoping that no Nigerian broker would be indicted in the course of investigating the alleged malpractice, he said that the new Local Content Law in the oil and gas industry had empowered indigenous insurance brokers because no business could be concluded except a Nigerian broker was involved.

”The commission will continue to collaborate with stakeholders in the insurance industry towards the achievement of the local content objective as it relates to insurance,” Daniel said.

Source: The Punch