What you need to know:
Need. There is need for local insurers to develop capacity through which they can write capital intensive risks
The Insurance Consortium for Oil & Gas, Uganda, a club of companies underwriting risks in the oil and gas sector, has said partnership with international insurers and reinsurers must be established to co-manage risks in Uganda’s oil industry.
Speaking during a training for insurers in Kampala last week, Mr Maurice Amogola, the chief executive officer of Minet, a brokerage insurance firm, said just like other potential support sectors, insurance companies in Uganda are doing all they can, both privately and under their various umbrella bodies, to appreciate the risks that might manifest in the oil industry.
“While risks can be mitigated in various ways, insurance is very critical and must not be ignored,” he said, emphasising that insurers must discuss with clients about potential risks and link them with firms that have capacity.
Mr Amogola said consortium has been engaging with a number of international insurers and reinsurers such as Germany-based Munich Re, Swiss Re-Insurance, London-based Chaucer, Beazley, and, Aspen.
With Uganda and the entire East African region fast becoming a lucrative oil and gas frontier, insurance brokerage firms have been shuffling out to cash in on the incoming investment bonanza.
However, concerns about the level of readiness and capacity to underwrite risks remain a big challenge.
In Uganda, while the insurance industry has been growing steadily over the years, it is relatively new to energy risks and requires a steady accumulation of capital to write quality risks, charge equitable fronting fees, and train to expand knowledge and a proper understanding of risks.
The Uganda Insurers Association, the umbrella body of insurers, in 2016 mobilised members to form the Insurance Consortium for Oil & Gas, Uganda to pool capital to cover some of the risks oil-related risks.
Mr Neil Genders, the director at UK’s AON, said at the training that local insurers must build their capital base slowly and efficiently without taking on more than they can afford.
The Insurance Consortium for Oil & Gas, Uganda, with a membership of 16 firms, has so far pooled $2m (Shs7.2b) specifically for the oil industry with a target of about $100m (Shs364b) in written premiums.
Several insurance firms have previously hinted on building capacity through establishing an oil and gas co-insurance syndicate scheme that was approved by the sector regulator – Insurance Regulatory Authority - in 2016 and is now pushing to ensure that the local content is upheld to allow local firms write most of the risk related to the sector.