Insurance companies in Nigeria transferred 63.4 per cent of the businesses they generated in the second quarter of 2023, Q2’23, to their foreign counterparts.

The volume of the transfers breaches the local content law which stipulates that only 30 per cent of oil and gas businesses should be ceded to foreign insurers while 70 per cent must be domiciled in Nigeria.

Details of the Q2’23 report by the National Insurance Commission, NAICOM, show the insurers generated N113.8 billion in oil and gas businesses, and N81.6 billion of that amount was ceded to foreign insurers. The local players were only able to retain N32.2 billion of the oil and gas businesses.

It will be recalled that Nigerian insurers transferred 74.8 per cent of income generated from oil and gas businesses to their foreign counterparts in the first quarter of 2023, Q1’23.

Experts attributed the development to the dollarisation of the oil and gas business which is having a huge impact on local retention.

Speaking on the development, Managing Director/Chief Executive Officer of International Energy Insurance, Mr. Olasupo Sogelola, said that the recurring depreciation of the Naira as well as increasing difficulty of accessing foreign exchange makes it difficult to comply with the requirement of the local content law.

He said that the oil and gas insurance business is transacted in dollars and once the Naira depreciates, retention comes down while the value of the risk goes up.

Sogelola noted that insurance companies in Nigeria have low capacity as many companies are still grappling with a relatively low capital base to engage in oil and gas business.