Insurers seek govt protection to underwrite oil and gas risks
Local insurers want the government to support them in order to grow capacity to handle risks related to the oil and gas sector.
What you need to know:
Local insurers believe they can attain growth if the government protects them against foreign firms in oil and gas insurance.
Kampala
Insurers have asked the government to formulate laws and ensure their enforcement in order to uplift the performance of the sector. Top on IRA’s proposals is to ensure that oil companies are not allowed to carry risks abroad, because this is illegal according to Ugandan laws.
Section 3(2)(b) of the Insurance Act [CAP 213] forbids any person other than a person licensed as an insurer under the said Act to issue any insurance policy on goods and assets situated in Uganda while Section28(1) of the same act forbids any person to transact insurance or reinsurance business in Uganda without a valid license granted for that purpose.
Total compliance to such clauses would in essence help to uplift the industry through capacity building and create more employment opportunities.
While presenting its views to the Natural Resources Committee of Parliament last week, Mr Kaddunabbi Lubega, the chief executive officer of IRA, said: “Throughout the whole oil exploration and refining process, there is need for insurance, a task which should be left to local firms.” “Each stage; exploration, drilling, construction, shipping, distribution, marketing and transportation, there is need for insurance,” Mr Kaddunabbi said.
Concerned over readiness
However, committee members led by Mr Michael Werikhe, the chairman, expressed concern over the sector’s capacity to handle risks related to oil and gas. “Underwriting of oil and gas involves huge risks which require heavy capital and expertise. It also requires good reinsurance backing and competent underwriters who are specialists in the oil and gas industry. We wonder how Uganda’s insurance sector is prepared for the tasks involved.”
However, Mr Kaddunabbi told the committee that the insurance industry had decided to form an Energy Insurance Syndicate which would jointly insure against such risks.
