Over sh745b insurance capacity stocked up for oil and gas risks

By John Odyek

The chairman of ICOG, Azim Tharani told journalists on Wednesday that the membership and participation to ICOG is open to all the licensed Non-life Insurance companies in Uganda.

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The Insurance Consortium for Oil and Gas (ICOG), a co-insurance group currently made up of 14 locally licensed insurance companies have raised over $200m (sh745b) aggregated insurance capacity in readiness to underwrite risks in Uganda’s the oil and gas industry.

The chairman of ICOG, Azim Tharani told journalists on Wednesday that the membership and participation to ICOG is open to all the licensed Non-life Insurance companies in Uganda.

“Such pooling of local insurance companies to underwrite such large risks one encounters in the oil and gas sector is common in many parts of the world, so in Uganda we are not re-inventing the wheel,” Tharani said.

He was briefing the media on the developments in the insurance industry during a press conference at the Sheraton Hotel, Kampala.

“Our involvement as local insurance companies in the oil and gas business will spur the insurance sector.

This will result in deepening penetration and increase our retention capacity as we grow together,” Tharani also the CEO Gold star Insurance said.

He explained that the consortium is governed by the Members’ Agreement that has been registered by the Uganda Registration Service Bureau.

The consortium has also been approved by the Insurance Regulatory Authority of Uganda with an approved set of guidelines to regulate its operations.

“All the members of the consortium are registered under the National Supplier Database that is managed by the Petroleum Authority of Uganda. This is a high risk venture of oil exploration, production and transportation.

We are ready to under write risks under the international standards available in other oil producing countries,” he said.

He noted that the Insurance Regulatory Authority has shown confidence by approving the guidelines for the consortium.

“This confidence will greatly back up our quest to the PAU to gazette insurance services as one of the ring fenced services under the National Content guidelines and additionally be aligned to the Insurance Act 2017 which stipulates and requires for all local risks and persons to be insured by insurance companies licensed to carry out insurance business in Uganda,” he said.

The 14 companies are; APA Insurance, BRITAM, CIC General, Excel Insurance, Goldstar Insurance, Jubilee General Insurance, NIC General Insurance, NOVA Insurance, PAX Insurance, MUA Insurance, SANLAM, Statewide Insurance, TransAfrica Assurance and UAP Old Mutual General.

Insurance penetration in Uganda stands at 0.85% according to the Insurance Regulatory Authority (IRA).

Insurance penetration in Tanzania is 2.3%, Rwanda 1%, while Kenya has the biggest penetration at 3.8% .

Maggie Lukowe, project coordinator ICOG said the insurance companies would insure property and liability against fire, accidents, theft, vandalism, environmental risks, oil pipelines bursting.

Lukowe said they will provide insurance for third party liability, marine, transit, delayed start- ups, operators extra expenses, property and liability, insure equipment in transit against accidents and insure equipment from breakdown which can cause delay.

Lois Aber, marketing manager, Stanbic Bank said the local banking industry need a similar consortium to provide huge amounts of capital for local entrepreneurs.

Aber said Stanbic Bank has experience in providing financing in oil producing countries like Angola and they will use that knowledge to fund Uganda’s entrepreneurs.

She noted that the bank was able to provide the needed capital for local small and medium size enterprises that will invest in the sector.

Aber said once companies get contracts in oil and gas, they can provide them loans on the basis of the contracts without the additional need for cumbersome collateral.

“Stanbic Bank has $50m which can fund in country operations of local companies investing in the oil and gas section. Once you get a contract for example for construction we give you a loan,” Aber said.

However Elly Karuhanga, chairman Uganda Chamber of Mines and Petroleum asked banks to syndicate loans to provide larger sums.

“The $50m can be taken up by one company. If Three Ways Shipping gets a contract for logistics and shipping, they can take up the $50m. So if a $200m is needed for example several banks should come together to pool the resources like insurance companies are doing,” Karuhanga said.

A stitch in time saves nine to prevent risks and accidents. But many businesses in Uganda do not insure against risks.

The low levels of insurance penetration is blamed on low levels of awareness, low levels of availability and quality of services and products, poor service delivery by some insurance companies.

There are number of benefits, including peace of mind, business continuity, income protection, protection against unplanned for expenses.