The oil and gas industry is a risky business especially when you look at the monies involved. And with the kind of bulky risks involved, businesses turn to insurance companies to cushion their investment and protect their operation in the event that a disaster occurs.
Uganda as a first time oil producer is even faced with much more risks that must be covered by insurance companies. And with an investment in the region of $20bn expected to make its way into the country to kick start oil production, the capacity of local insurance companies will be put to test.
Over the years, insurance companies operating locally in Uganda have been trying to figure out how they can wholesomely take up the opportunity that is selfishly presenting itself. The culmination of this thinking was been creation of Insurance Consortium for Oil & Gas, Uganda in 2016, which now is being capitalized to capacitate its functions as Uganda nears start of oil production.
RAISING FINANCIAL CAPACITY
The chairperson of the consortium Mr. Azim Tharani, also Managing Director of Goldstar Insurance, speaking at Uganda Chamber of Mines and Petroleum recently said that they currently 14 member companies. He said are looking at raising financial capacity of $200m. They have so far raised $2m to cover some of the risks under the oil and gas sector.
The members were mobilized by Uganda Insurance Association (UIA), an umbrella body that brings together all insurance firms and insurance brokerage firms.
The consortium has reportedly partnered with other international insurers and reinsurers including: Munich Reinsurance, Swiss RE-Insurance, Chaucer, Beazley, Aspen and many others from the Lloyds market in London. Just under $3 billion is spent globally in insurance premium on oil and gas per year; hence re-insurance is inevitable.
Insurance opportunities in the oil and gas sector include oil well drilling equipment, rigs, in-hole equipment, bulk cargo, Construction All Risk (CAR), business interruptions, delayed start-up, waste in transit, works and infrastructure of disposal units, pipeline, heating equipment, oil and gas stocks, storage facilities, production storage facilities goods in transit and vessels and camps amongst others.
“It is sensible for the local Uganda market to build up its capital base slowly and efficiently; and not take on more than it can afford to pay out in claims,” says, Mr. Neil Genders, a director at AON, UK, said at an an oil and gas training in Kampala organized by their correspondent partner Minet Uganda.
EXPAND EXPERTISE IN OIL AND GAS INSURANCE
At the same training, Mr. Deepak Pandey, CEO, Jubilee Insurance, said insurance firms have to expand their expertise in oil and gas insurance. "We have to develop and grow steadily with the economy. As we retain more of the insurance premium in Uganda, our ability to cover the bigger part of the risk will grow year on year. So while our capacity may look small now, the key thing is that we have to start from somewhere. This is why the government of Uganda is insisting on Local Content participation,” said Mr. Pandey.
Uganda’s Local Content Policy 2018 commits to supporting participation of Ugandans in the oil and gas sector, through improving the country’s human resources, employment of local citizens and enterprises plus improve local competitiveness and in-country research, development and technology transfer to Ugandans.
Minet (then trading as AON, Uganda) was very instrumental in Uganda’s exploration stage, where it offered insurance solutions to a number of clients. “Just like other potential support sectors, insurance companies in Uganda are doing all they can, both privately and under their various umbrella bodies, to understand the oil industry as well as train their personnel to appreciate the risks that might manifest in this new market,” says Mr Maurice Amogola, the CEO, Minet Uganda.
“While risks can be mitigated in various ways, insurance is very critical and must not be ignored by the government, the oil companies or their services providers. As an insurance consultancy, Minet’s job is to discuss with clients about the potential risks and subsequently connect them to suitable insurers to cover them,” says Mr. Amogola.