By Nike Popoola

Wednesday, 22 Dec 2010

The Commissioner for Insurance, Mr. Fola Daniel, on Tuesday, introduced the guidelines for oil and gas insurance business in the country.

Stakeholders in the industry, comprising insurers, brokers, loss adjusters and chartered insurers, were present during the presentation of the guidelines in Lagos.

Daniel noted that the guidelines were issued pursuant to the provisions of the Insurance Act, 2003 and the National Insurance Commission Act, 1997.

“No person or organisation shall transact an insurance or reinsurance business with a foreign insurer or reinsurer in respect of any life, asset, interest or other properties in Nigeria, classified as domestic insurance, unless with a company registered under the Insurance Act, 2003.”

The guidelines also noted that an insurance broker who wanted to do business must possess a current professional indemnity policy with a minimum limit of liability of N100m.

It added that no insurance risk in the Nigerian oil and gas industry should be placed overseas without the written approval of the commission, which should ensure that the Nigerian local capacity had been fully exhausted.

The document pointed out that a person or organisation who contravened sub-sections 2.2 and 2.3 should be penalised.

Such a person, according to the document, shall pay a penalty, which will be equivalent to 10 times the amount of premium paid without regards to the policy issue; and he shall pay five times the amount of premium involved in the business transacted.

The document defined local capacity as the aggregate capacity of all Nigeria registered insurers and reinsurers which should be fully exhausted prior to any application for approval to reinsure any Nigerian oil and gas risks overseas.

It added, “An insurer‘s capacity for oil and gas policies shall be the net retention of that insurer plus its reinsurance treaty capacity. The reinsurance treaty capacity of a consortium of insurers is also acceptable.

Any other reinsurance facility, other than the treaty, is acceptable as an insurer‘s capacity, provided there is evidence that the risk has attached and cover provided by an acceptable security.”

 

Source: Punch