NEW NIGERIAN LAW DOES LITTLE TO HELP LOCAL INSURERS

The Nigerian Oil & Gas Local Content Act, passed into law in April 2010, appears to have done little to help local insurers because they do not have the capacity to take advantage of the law, which implies that no oil or gas risk can be placed with a foreign player without the approval of the National Insurance Commission (NAICOM). Law Union & Rock Insurance managing director Yinka Bolarinwa told local paper Vanguard that insurers had not "positioned themselves strategically" to take advantage of the opportunities offered by the Act. In November 2011 NAICOM Commissioner Fola Daniel said that the Local Content Act gave brokers "huge leverage", requiring that all oil and gas insurance business be transacted through a Nigeria-registered insurance broker. But Royal Exchange chairman Kenneth Odogwu said that this broker advantage had not translated into more risk being kept at home because insurers do not have the required capacity. NAICOM, and the Nigerian government, would like to see 70% of oil and gas risk retained in Nigeria, but Mr Odogwu estimated that only 5% was retained locally. The chairman of Standard Alliance, Alhaji Aliyu Sa'ad, said that this also increased the risk of insurers retaining risks that they should not keep, leading to a greater risk of insurer default in the event of an energy catastrophe. The Nigerian National Petroleum Corp (NNPC) has been accused by insurance leaders of channeling all of its insurance business abroad through an offshore firm. These insurance representatives claim that it is the NNPC, rather than an intrinsic lack of capacity at home, that is the cause of the Local Content Act failing to have the desired effect.