Regarded as the most complicated sector for many workers in the metropolis, the sector has contributed enormously to the country’s revenue. A major challenge in Ghana’s oil and gas industry is how to develop the sector with optimal local content and participation, enhance national development and create jobs. Despite huge investments in projects and operations in the oil industry, there has been very little participation of indigenous Ghanaian companies, especially in the insurance sector due to what seems like the disrespect to laws by many multinational companies.
To many citizens, the reason for the obscure treatment of many indigenes in the sector is due to the inability of government to ensure laws are followed to the latter. This resulted the call for Oil & Gas Insurance Placement for the Upstream Sector by two industry players, the Petroleum Commission (PC) and the National Insurance Commission (NIC).
Just like the name sounds, the insurance policy guide was developed to overcome challenges of low participation by Ghanaian insurance companies. Members of the Ghana Insurers Association underwriting non-life insurance business formed a consortium – Ghana Oil and Gas Insurance Pool (GOGIP) to pool their resources together to underwrite oil and gas risks arising from limitations in the area of Finance, Human Resource as well as Technology.
However, the Local Content Regulations 2013 which was enacted to maximize the use of locally produced materials, personnel, financing, goods and services rendered in the petroleum industry value chain and which can be measured in monetary terms is still battling with some of these limitations.
The oil and gas insurance placement for upstream sector was a major breakthrough for oil and gas industry players since it offers an avenue for spreading the risk involved in oil and gas insurance and also presents an opportunity for training and developing capacity in the Ghanaian insurance market. The protocol also opens a window of opportunities for the underwriting companies and brokers to actively participate and play a lead role in the oil and gas business in Ghana.
The protocol retreats on some benefits that Ghanaian companies and organisations must enjoy. It states that any person who seeks to obtain insurance offshore service relating to a petroleum activity must obtain a written approval of the NIC, which shall ensure that Ghanaian local capacity has been fully exhausted.
According to the protocol, as at 31st December 2013, the insurance industry in Ghana has market players which consist of 25 non-Life Insurers, 19 Life Insurers, 2 reinsurers, 59 brokerage Companies and 5000 recognised Agents.
It further sets out the rationale and principles underlying placement of insurance in the upstream petroleum sector in accordance with the Insurance Act 2007, Act 724 and the Petroleum (Local Content and Local Participation) Regulations 2013, (L.I. 2204) as well as the procedures which must be complied with in placing upstream insurance.
In the protocol, a contractor, subcontractor, licensee or other allied entity is expected to utilize the services of indigenous insurance brokerage firms in the primary placement of all insurances relating to petroleum activities, ensuring that as many indigenous Ghanaian firms are given maximum opportunity to fully participate in the sector in accordance with Regulations 1, 3 and 27(2) of the Petroleum (Local Content and Local Participation) Regulations, 2013, (L.I. 2204).
The protocol is also responsible for monitoring compliance. The two state institution will keenly monitor request for validation of information contained in the quarterly and annual reports, and submission of documentary evidence of insurance services utilized.
Section 38 of the protocol states that “A person may apply to the Commission, or through an insurance intermediary, for authorization to enter into a contract of insurance of a type specified in section 37(1) with an offshore insurer”.
Under Approval of offshore insurance, the protocols stipulate in Section 28, sub section (1) that “A person who seeks to obtain an insurance offshore service relating to a petroleum activity in the country shall obtain written approval of the National Insurance Commission”. It further discloses in sub section (2) that in granting an approval for procuring insurance services offshore, the National Insurance Commission shall ensure that Ghanaian local capacity has been fully exhausted.
The eighteen-page document on oil and gas insurance also spells out penalty clauses for each of the laws as well as features local Content laws, Insurance law.