NNPC Boss Calls For Further Recapitalisation In Insurance Industry

The Group Managing Director of NNPC, Alhaji Abubakar Yar'Adua, has suggested a further recapitalisation in the nation's insurance sector to give it an edge in underwriting oil and gas risks.
Yar Adua made the suggestion in a paper on `Local Content D', at the 12th Champion Insurance Day in Lagos on Tuesday.
He said another round of recapitalisation had become necessary because local insurance companies still lacked enough capacity to fund oil and gas risks.
The NNPC chief, who was represented by Mr Ayo Bameke, NNPC Group General Manager in charge of insurance, commended efforts of insurance companies in training their staff on competencies in oil and gas underwriting.
He, however, said that they could do more. Yar'Adua said the risk exposure in the local oil and gas industry was close to 101 billion dollars (N11 trillion), with corresponding premium of 224 million dollars.
He said about 33 billion dollars of the risk exposure was being retained in Nigeria while the total assets of the 40 recapitalised insurance companies in the country was only N177 billion or 1.5 billion dollars at December 2007.
The NNPC boss urged insurance companies to adopt risk-based capitalisation by creating separate balance sheets for each class of business.
``You need to develop relevant skills so that pricing of risks could be done in Nigeria and you also need to avoid unhealthy competition that erodes potential profitability of companies,'' he said.
Yar'Adua said that the NNPC, through its Nigeria Content Division (NCD), had successfully pushed the draft bill on local content development to the national assembly and would soon be passed into a law.
According to him, the Nigerian Content Fund of between 300 million dollars to 500 million dollars was available to support working capital and medium to long term financing.
He that the organisation was also executing over 20 intervention projects to bridge local capacity gaps such as infrastructure upgrades, training and certification, information management and financing.
The Minister of Finance, Dr Shamsuddeen Usman, said that the Nigerian Local Content Bill, when passed into law, would boost the nation's economic development and growth.
He said that it was the responsibility of the insurance industry to demonstrate that it had capacity and workable strategies for achieving and sustaining the 45 per cent local content target of the federal government.
The Minister, who was represented by the Commissioner of Insurance, Mr Fola Daniels, promised that the National Insurance Commission (NAICOM) would partner with the NNPC.
He said that the partnership was to work out modalities for partnering with the domestic insurance companies to develop appropriate strategy to ensure optimum participation in the domestic market.