Nigeria Content Online

Shares
of insurance companies will likely attract more patronage and better
returns this year, as the industry gears up to the implementation of
the local content policy in the oil and gas industry.

The
Nigeria Content Development Act 2010, which was recently passed into
law by President Goodluck Jonathan, provides among others, for 40 per
cent, 70 per cent and 100 per cent minimum local retention in marine,
none-life and life insurance services in the Nigeria oil and gas
industry.

The
boost would come from the major plank of the Act, which requires that
all insurance risks associated with oil and gas businesses, including
prospecting, exploration, drilling, constructions, shipping,
distribution, marketing and transportation are to be insured in Nigeria
with registered Nigerian insurance underwriting companies.

This
is a strategy by the government to increase the vibrancy in the local
insurance industry and improve local capacity. Local capacity, in this
case, refers to the aggregate capacity of all Nigeria registered
insurers and reinsurers which shall be fully exhausted prior to any
application for approval to reinsure any Nigerian oil and gas risks
overseas.

Local firms are capable

Sunday
Thomas, director general of the Nigeria Insurers Association (NIA), the
umbrella organisation for all insurance companies in Nigeria, said the
industry will be greatly enhanced by the new drive.

Mr.
Thomas said the guidelines for the implementation, as recently released
by the National Insurance Commission (NAICOM), has set the tone for
improvement in the industry, adding that local firms are capable of
meeting the challenge.

“For
like four years now, the issue of local content has been on and
companies have been gearing up. Some companies have stepped up capacity
and even capital base to be able to participate,” he said.

Commissioner
for insurance, Fola Daniel, in response to enquiries on how the
commission would address the issue of implementation, said the issue of
local content as it affects the insurance industry is a long drawn
issue that cannot be responded to on phone. Mr. Daniel has, however,
been at the forefront of drafting the guideline for the implementation.

The
guideline says, “No insurance risk in the Nigerian oil and gas industry
shall be placed overseas without the written approval of the
commission, which shall ensure that Nigerian Local Capacity has been
fully exhausted.”

Mr.
Thomas said the Act would build capacity in the industry, as local
insurance companies are expected to carry the risks directly in their
books.

He
said the insurance companies listed on the Nigerian Sock Exchange would
be able to meet the dividend expectations of the shareholders:

“Ongoing
capital market reforms are expected to lead to improvement in market
and insurance shares will be more attractive to investors.”

Out
of the four indices measured by the Nigerian Stock Exchange (NSE), only
the NSE Insurance Index depreciated last year, dropping 80.67 points or
37 per cent, reflecting the decline in the prices of equities in the
sector.

“I
believe strongly that the insurance sector is going to partake
extensively in the reversal going on in the economy,” Mr. Thomas said.