Maximising Local Retention in Upstream Oil and Gas Insurance whilst ensuring “A” rated Security requirements of Assureds Presented by : Kwabena Larbi, Head of Technical, GOGIP November, 2019
Maximising Local Retention in Upstream Oil and Gas Insurance whilst ensuring “A”: rated Security requirements of Assureds Agenda ▪ GOGIP Overview ▪ Increasing Local Retention ▪ Next steps
Overview
GOGIP ▪ Established in 2010 ▪ The exclusive body authorised to provide insurance for assets and liabilities directly relating to upstream and midstream Oil and Gas ▪ Mandated by: ▪ Insurance Act 2006, (Act 724) ▪ Petroleum Local Content and Local Participation Regulation, 2013, (L.I. 2204) ▪ Protocol for the Placement of Upstream Oil and Gas Insurance Risks, 2014 ▪ Pool Managers: ▪ October 2016 to Present: Enterprise Insurance ▪ The Pool represents 22 of 30 licensed general insurance and reinsurance companies in Ghana
Our Objectives • Build in-country insurance capacity thereby reduce foreign exchange outflow 1 • 2 Develop manpower capacity and technical expertise in the insurance of oil and gas related risks • 3 Ensure oil companies within Ghana are charged competitive premium rates that will enhance profitability and stabilize insurance market • 4 Provide technical support and advice to Pool members on matters relating to risk management and oil and gas related risk
Increasing Local Retention
INCREASING LOCAL RETENTION Local retention in the Ghana oil & gas insurance market has increased from 2 to 8% in the past 2 years In-Country Insurance Premium, $m Foreign Insurance Premium, $m % In-country Gross premium, $m % in-country 70 8% 61.0 7.9% 7% 60 6% 46.7 50 42.3 5% 40 4% 30 3% 20 2.8% 2% 10 1.9% 1% 0 0% 2017 2018 2019
INCREASING LOCAL RETENTION We have focussed on 4 key levers to increase local retention in a sustainable manner Lever Description ▪ New Guidelines on Oil and Gas Insurance 1 Regulatory Placement support ▪ Local capacity increased from USD 24 million to 2 Underwriting USD 175 million capacity ▪ Premium pricing reflects exposure of local market 3 Benchmarks insuring only Ghana based assets ▪ Trained over 100 underwriters and brokers on 4 Training upstream and offshore energy risks
INCREASING LOCAL RETENTION 1 Regulatory Support: New Guidelines on Oil and Gas Insurance Placement were issued in 2019 by National Insurance Commission (NIC) ▪ Direct Insurers and Reinsurers can accept Upstream Oil and Gas risks ▪ Local capacity backed by A-rated S&P reinsurance securities ▪ Risk offered to local insurers must be signed off by their lead reinsurer ▪ 7 companies approved by NIC to accept upstream risks
INCREASING LOCAL RETENTION 2 Underwriting Capacity: 6-fold increase in Local capacity to 175m since 2018 175 ▪ Local capacity increased to USD 175m from 25m in 2018 ▪ Securities of reinsurers meet requirements of oil companies, lenders and financiers with confidence to +151 fulfil claims obligations ▪ Reinsurance securities – 30 ‘A’ rated S&P companies supporting local capacity ▪ Programme led by world class energy 24 underwriters inc. W.R. Berkeley and Chubb (London market) and Tokio Marine Kiln (Lloyd’s) ▪ Reinsurance back-to-back with original insured 2018 2019 policies GH underwriting capacity, $m
INCREASING LOCAL RETENTION 3 Benchmarking Premium Pricing: supporting the local market to compete in an international marketplace ▪ International insurers benefit from economy of scale through global insurance of clients’ assets: ▪ Premium pricing is submitted to the local market based on global pricing agreements ▪ Discounts and credit are applied on premium e.g. bulk credit, package credit, fleet discount, Good client credit, brokerage credit, etc. ▪ This premium pricing is not sustainable for local market as local market does not have the same global programmes ▪ We have taken several measures to counteract this and ensure class of business is sustainable : ▪ Every risk submitted to the local market is re-rated by GOGIP on the basis that the local market is underwriting solely that risk ▪ Common assets e.g. subsea infrastructure and drilling wells are priced as one Ghana asset irrespective of JV interest
INCREASING LOCAL RETENTION 4 Training: investing in our people to build local underwriting capacity ▪ Over 100 underwriters and brokers trained in upstream and offshore energy insurance facilitated by world-class upstream insurance expert ▪ Insurance awareness seminar held for over 70 upstream companies in 2018 ▪ Training offered to local companies who have set up oil and gas insurance departments ▪ Capability building of GOGIP staff through international Global energy insurance courses ▪ Collaborative relationships established with underwriters at Lloyd’s of London to support and ensure underwriting on par with international standards
Outlook
NEXT STEPS Outlook: We aim to increase local retention to 40% by 2025, through focussing our efforts in 3 areas We have an ambitious target to reach 40% We will focus in 3 areas local retention by 2025 to achieve this 40% In-Country Insurance Premium Training 2025 Target In-Country Insurance Premium Re-invest capital 8% Increase visibility & 3% 2% network 2017 2018 2019 2025
NEXT STEPS What about you? ▪ What steps can you take in your business to increase local content? ▪ Interested in a training programme or buying insurance soon? Get in touch!
Thank you Kwabena Larbi BSc.(Mech Eng), ARM, CIP, AICLA(Aff), ANZIIF(Snr. Assoc.)CIP Head of Technical, GOGIP kwabena.larbi@gogip.org +233 26 4000 702
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