Local players in the insurance sector need to strengthen their financial and human resources to take on huge oil and gas risks.
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Insurance companies target a larger share of the oil sector
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Uganda's Insurance Regulatory Authority is strengthening the capacity of local insurance companies to meet the growing demand from the oil and gas sector, said Alhaj Kaddunabbi Ibrahim Lubega, its Managing Director.
Capacity building is at the heart of this approach if the insurance industry is to demand a bigger slice of the pie.
"The Authority has ensured that a portion of the premiums generated by oil and gas risks are earmarked for industry training on oil and gas risks," he said.
He was responding to questions about foreign insurance companies stifling the efforts of local insurers to take advantage of national content provisions.
In its 2022 annual report, the Association of Ugandan Insurers, part of the Oil and Gas Insurance Consortium (ICOGU), an organization of 19 local insurance companies, reported that premiums worth $9.4 million had been written for the Tilenga project, operated by Total E&P Uganda.
The consortium has also taken out insurance policies totalling $2 million for the East African pipeline and $3.2 million for the Kingfisher project - operated by CNOOC Uganda Limited.
However, at a press conference organized by the Ugandan Chamber of Mines and Petroleum (UCMP), Jonan Kisakye, Managing Director of the Association of Ugandan Insurers, said: "It hasn't been a bed of roses because the oil companies have different interpretations of the situation. laws and contracts.
"Expectations of local content were also a problem," he added, explaining that when oil companies imported rigs into the country - which are used in the early stages of oil drilling in the Albertine Graben - local insurers didn't align with oil. companies to the insurance law that requires local marine coverage.
"This has resulted in a loss of revenue on our side," he said. "But this is just the production phase. We'll align as we go along.
On the other hand, Kisakye agrees that local players in the insurance sector need to strengthen their financial and human resources to take on huge oil and gas risks.
For example, he said, the current market capacity of local insurers for non-life insurance is less than $1.5 billion, but investments in oil and gas infrastructure that need to be insured have grown over the years to around $50 billion.
Kisakye said that thanks to reinsurance, local companies can write more premiums as they develop their financial capabilities.
"We need to reassure industry players that insurers are capable of taking huge risks locally," he said.
The insurance industry needs skills and training for this high-end engineering party. When it comes to capacity, Kaddunabbi explained, insurance relies on several levels of protection, firstly retention, which is kept locally here, and then reinsurance, which helps the sector harness the capital and expertise of reinsurers who are mostly local to the African continent.
Looking ahead, Kaddunabbi says: "Our insurers have combined their capacity as ICOGU to retain some of this risk while we study and learn to appreciate the intricacies of the business. Over time, we will see more risks retained locally.
For his part, Kisakye said there would be continued engagement with international insurers on favorable terms, in line with the intricacies of insurance requirements and the need to align with regulatory frameworks.
He said ICOGU has many opportunities to expand its services, promote local content development and contribute to the overall advancement of Uganda's oil and gas sector.
Individual insurance companies see opportunities for the oil and gas sector in the future.
In an interview, the CEO of Minet Uganda Insurance Brokers Limited, Mr. Edward Nambafu, sees several opportunities in the sector due to Africa's abundant natural resources.
"Demand for these resources remains high, attracting foreign investment, including China... In addition, there is a growing emphasis on environmental, social and governance strategies, which open up opportunities for insurance solutions linked to sustainability and responsible resource extraction."
As the industry evolves, there will be a growing need for comprehensive insurance coverage, according to Mr. Nambafu.
On the other hand, Mr. Nambafu said that oil and gas are subject to various risks and uncertainties, including legislative changes, environmental impacts, political situations and infrastructure challenges.
To meet these challenges, he said Minet is well-prepared to provide risk management solutions that are adaptable and responsive to changing circumstances.
"Our experience in other markets and our global reach enable us to call on external capabilities and expertise when needed, ensuring that we can adequately cover emerging risks," he added.
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