In the second quarter of 2023, Nigerian insurance companies handed over 63.4% of their generated business to foreign counterparts, a significant violation of the local content law.

This law stipulates that only 30% of oil and gas business should be underwritten by foreign insurers, while the remaining 70% must remain within Nigeria.

The Q2'23 report from the National Insurance Commission (NAICOM) revealed that insurance companies generated N113.8 billion in oil and gas businesses, with N81.6 billion transferred to foreign insurers. Local insurers retained just N32.2 billion of the oil and gas business.

During the first quarter of 2023, Nigerian insurers had transferred 74.8% of their oil and gas business income to foreign companies, showing a recurring trend of dollarization in this sector, which significantly affects local retention.

Olasupo Sogelola, the Managing Director/Chief Executive Officer of International Energy Insurance, pointed out that the continuous depreciation of the Naira, along with challenges in accessing foreign exchange, makes compliance with local content law difficult. He noted that as oil and gas insurance transactions are conducted in dollars, the depreciation of the Naira leads to lower retention and increased risk value.

Additionally, Sogelola mentioned that many Nigerian insurance companies have limited capacity due to relatively low capital, making it challenging to engage in the oil and gas business. The dollarization of this sector also results in higher claims payments for insurers.

He added: “Claims are also affected because the claims that you have incurred that you have not paid, by the time it crystallises, you will pay at a higher value.”