Maximising Local Retention in Upstream Oil and Gas Insurance whilst - - PowerPoint PPT Presentation

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

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GOGIP Overview

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Increasing Local Retention

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Next steps

Overview

GOGIP

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Established in 2010

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The exclusive body authorised to provide insurance for assets and liabilities directly relating to upstream and midstream Oil and Gas

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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

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Pool Managers:

▪ October 2016 to Present: Enterprise Insurance

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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
• Develop manpower capacity and technical expertise in the insurance of oil

and gas related risks

• Ensure oil companies within Ghana are charged competitive premium rates

that will enhance profitability and stabilize insurance market

• Provide technical support and advice to Pool members on matters relating to

risk management and oil and gas related risk 1 2 3 4

Increasing Local Retention

INCREASING LOCAL RETENTION

60 40 10 20 30 50 70 0% 1% 2% 3% 4% 5% 6% 7% 8%

Gross premium, $m

2019 1.9% 2017 61.0 7.9% 2.8% 2018 46.7 42.3

% in-country

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

We have focussed on 4 key levers to increase local retention in a sustainable manner

Lever Regulatory support Underwriting capacity Benchmarks Training 1 2 3 4

INCREASING LOCAL RETENTION

Description

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New Guidelines on Oil and Gas Insurance Placement

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Local capacity increased from USD 24 million to USD 175 million

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Premium pricing reflects exposure of local market insuring only Ghana based assets

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Trained over 100 underwriters and brokers on upstream and offshore energy risks

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

1

INCREASING LOCAL RETENTION

Underwriting Capacity: 6-fold increase in Local capacity to 175m since 2018

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Local capacity increased to USD 175m from 25m in 2018

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Securities of reinsurers meet requirements of oil companies, lenders and financiers with confidence to fulfil claims obligations ▪ Reinsurance securities – 30 ‘A’ rated S&P companies supporting local capacity ▪ Programme led by world class energy underwriters inc. W.R. Berkeley and Chubb (London market) and Tokio Marine Kiln (Lloyd’s) ▪ Reinsurance back-to-back with original insured policies

2

24 175 2018 2019 +151

GH underwriting capacity, $m

INCREASING LOCAL RETENTION

Benchmarking Premium Pricing: supporting the local market to compete in an international marketplace

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International insurers benefit from economy of scale through global insurance

• f 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.

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This premium pricing is not sustainable for local market as local market does not have the same global programmes

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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

3

INCREASING LOCAL RETENTION

Training: investing in our people to build local underwriting capacity

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Over 100 underwriters and brokers trained in upstream and offshore energy insurance facilitated by world-class upstream insurance expert

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Insurance awareness seminar held for over 70 upstream companies in 2018

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Training offered to local companies who have set up oil and gas insurance departments

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Capability building of GOGIP staff through international Global energy insurance courses

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Collaborative relationships established with underwriters at Lloyd’s of London to support and ensure underwriting on par with international standards

4

INCREASING LOCAL RETENTION

Outlook

NEXT STEPS

2% 3% 8% 40% 2019 2017 2025 2018

In-Country Insurance Premium 2025 Target In-Country Insurance Premium

Outlook: We aim to increase local retention to 40% by 2025, through focussing our efforts in 3 areas

We will focus in 3 areas to achieve this Training Re-invest capital Increase visibility & network We have an ambitious target to reach 40% local retention by 2025

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!

NEXT STEPS

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