Only 10% of oil & gas businesses are insured locally

Only 10 percent of companies operating along the entire upstream oil and gas value chain are insured locally with the largest chunk getting insured internationally due to the lack of capacity by the local insurer, Chief Executive Officer of Glico Group of Companies, Edward Forkuo Kyei, has said.

According to him, though the law gives underwriting preference to locals, the worth of the oil & gas sector is in billions of dollars and to ensure such a venture requires a huge sum of money which local insurance companies do not have the capacity to undertake, and even those who have the capacity cannot afford to put all their eggs in one basket.

“As insurers, one of the ways or mechanism we use to manage our risk is to spread it across sectors. So far as the law of insurance is concerned no foreigner can underwrite business in our territory, it is a preserve for companies registered in our country.

Before any business goes outside, the law requires the local capacity to be exhausted but even when all the insurance companies come together because the amount at stake is huge, it is very difficult to do that apart from the fact that we may not also have the technical expertise to do that,” he said.

Mr. Forkuo Kyei, made these remarks on the sideline of the maiden Money Summit 2021, an event organised by the Business and Financial Times (B&FT) to discuss issues relating to the country’s financial sector, held under the theme: ‘The role of the financial sector in post-pandemic recovery’.

However, he added that to ensure local participation and benefit from the sector, the players have put together an arrangement to underwrite such huge capital businesses as a pool (Oil & Gas Pool), where insurance companies interested in underwriting such business have come together to pool resources to enable them to embark on such risky venture.

Commenting on the possibility of local insurers gaining a strong presence in the oil & gas sector and how soon that could be, he indicated that even if possible in the short-term, it is not economically viable for local insurers because it will mean putting all their money/investment in one basket.

“Gradually as we are increasing financial and technical capacity as an industry, we can be increasing the retention from the 10 percentage to 20, 30 or 40 percentage and gradually grow to full capacity,” he emphasized.