Source-Business Day
As bidding for major oil, gas and aviation risks for the 2015 financial year heats up, insurers are signing new treaties to back their capacity for high premium accounts.
This is as treaties have become mandatory for insurers wishing to play in high risk sectors, which form a major source of industry premiums.
For instance, companies such as the Nigerian National Petroleum Corporation(NNPC), Chevron and other oil majors, stipulate that insurers wishing to underwrite their risks must have strong reinsurance backing ( treaties) to be enlisted.
Industry sources say that underwriting companies have been holding strategic meetings with major reinsurers and reinsurance brokers in the Lloyds and UK market to secure treaties for the current business year.
Analysts who spoke to BusinessDay said the treaties are there but the challenge is pricing, as most of the reinsurers are tough on pricing conditions, and this raises concerns on ethical conduct down here in the local market.
The analysts say what the reinsurers have found attractive in the Nigerian market currently, is the impact of the policy on “No Premium No Cover.” They say the credit will however go the regulator, the National Insurance Commission.
“The Nigerian market has become attractive because of the impact of the “No Premium No Cover Policy”, which has enhanced market liquidity and more importantly, improved response on claims payment.
One of the deals was sealed by Anchor Insurance plc, which in readiness to absorb more risks and provide enhanced services in the aviation sector, has secured some partnerships. The company recently signed a deal with leading aviation insurance/reinsurance company, AIG Insurance Group and its subsidiary in Europe for Aviation and Liability Line slip for Reinsurance Treaty for the purpose of extending superior aviation services to its clients.
According to Mayowa Adeduro, managing director of Anchor Insurance, the company has therefore extended its capacity to aviation, airport and product liability for bodily injury and property damage, up to a combined single limit of US$ 500,000,000 and US$ 50,000,000 for any one aircraft/hull.
Adeduro, while receiving the aviation treaty, reaffirmed the company’s commitment of quality and efficient service delivery and promised that with the extended aviation treaty now in place, the company is well positioned to render adequate and superior aviation cover to its clients.
Meanwhile, it has signed a partnership with Meridian Risk Solutions Limited, a fully accredited independent Lloyd’s Broker, with specialties in Marine, Energy, Non-Marine and Reinsurance.
Industry sources say several developments are going on along these lines with other firms with similar profile and outlook. Firms that fit the profile include Custodian and Allied plc, Leadway Assurance Limited, AIICO Insurance plc; Mansard Insurance, Sovereign Trust Insurance plc, Niger Insurance plc and LASACO, as well as Consolidated Hallmark Insurance for aviation risks.
A CEO managing one of the top five underwriting firms said “what we have done is to secure our treaties for the new year because it is important to enable us file for bids in some corporate accounts.”
He said his company has signed treaties with top reinsurers and brokers in the international market, including Lloyds, Munich Re, Swiss, as well as African Re, Nigeria Re and Continental Re, within the local market, to enable for bids in oil and gas businesses for this year.
Sunday Thomas, director-general, Nigerian Insurers Association (NIA) had stated that companies are taking this time to review their business operations, and plan for the new year.
Thomas said he expects that business in this year, will firm up with proper pricing, given the volatility of risk in the environment. This, he believes will create more value for the business in terms of premium growth and improved service to the consumer.
According to him, the different reform efforts by all arms of the industry, targeted at improving the fortunes and building confidence among the insuring public, will begin to yield result in the coming years.
Beginning from October each year, insurance companies across the world begin firming up their positions in readiness for new businesses and retention of existing accounts for the coming year.
This time, business acquisitions for 2015 have started with underwriting companies forming alliances on new accounts and renewing old ones for the new business year. This is also the time for signing of reinsurance treaties with major reinsurance companies locally and internationally.
Signing treaties comes with renewal. Insurance business renewal is when a policy period expires and a new policy period begins. Renewal dates typically occur six months or one year after the policy began, or the last renewal date occurred.
Renewal dates give both the insurance company and the insured, the opportunity to make any necessary changes to the policy.
If the insurance company determines that the risk posed by the policyholder has changed, it may amend the policy, add restrictions or terminate coverage. General policy changes that affect all insured also take place at policy renewal.
A change in risk may also trigger a premium change at renewal. A policy holder who has not filed any claims may see a premium reduction, while a policyholder with several claims may see an increase.