DAR TARGETS 33BN/- IN OIL, GAS INSURANCE PREMIUMS

TANZANIA will be capable to underwrite at least US$20 million (about 33bn/-) in insurance premiums a year from oil and gas industry in the next few years, provided the country puts in place the right policy and law.

This was revealed in Dar es Salaam over the weekend, when the Minister of State in the President's Office (Special Duties) visited offices of the Tanzania Insurance Regulatory Authority (TIRA).

The Commissioner of Insurance, Mr Israel Kamuzora, said in his report that several countries with oil and gas economies, including Nigeria have clauses and provisions expressly directing insurance services to be provided locally. "Tanzania can learn a lot from those countries," Mr Kamuzora said.

He said 30 insurance firms operating in Nigeria in 2010 collectively underwrote over US$ 200 million premiums from companies involved in oil and gas activities.

Mr Kamuzora urged for putting in place a clause that directs all firms involved in oil and gas activities to take insurance covers locally, despite claims that the nature of the industry would demand insurers with herculean financial muscle.

He said local insurance companies through the Association of Tanzania Insurers (ATI) are aware of the impending challenge and have initiated the process of forming the Oil and Gas Pool (OGP) so that they can handle such lucrative covers collectively.

This perhaps answers the ongoing outcry by members of the private sector in the country who claim that they have been sidelined by the government in as far as gas and oil economy is concerned.

The Minister for Energy and Minerals, Prof Sospeter Muhongo, has repeatedly said that the oil and gas policy is in pipeline and a relevant time frame would be in place soon than later.

East Africa has become one of the world's most sought-after oil and gas provinces after a string of vast discoveries attracted foreign companies seeking new gas sources to supply energy-hungry Asian markets. Tanzania estimates it has about 48 trillion cubic feet (tcf) gas following big finds off the country's southern coast.

The country has production sharing agreements with several majors such as BG Group, Ophir Energy, Exxon Mobil and Statoil. The private sector, demands among other things, that the policy should ensure that the domestic market is given first priority over the export market in gas supply and local interest must be taken aboard.

According to TIRA the national insurance policy is currently under review and is expected to be ready later this year. Its implementation is expected to begin within the next two years.

Mr Kamuzora briefed the minister on the achievements and challenges in the insurance industry since 1960s, shortly after the country's independence when foreign firms dominated the scene, followed by nationalisation and later liberalisation.

The Tanzania Insurance Board Chairman, Mr Peter Ilomo, said as at December, last year, the country had 29 insurance companies including one re-insurer, 89 insurance brokers, 304 agents and 45 loss adjusters.

Mr Ilomo said the performance of the country's insurance market was quite satisfactory in 2013, where in general the industry grew by 17 per cent.

Premium underwritten during during the year reached 475.8bn/- billion, up from 406.5bn/- in 2012. Assets of insurance firms also grew by 15.2 per cent from 450.5bn/- in 2012, up to 518bn/- last year, while investments were up by 16.3 per cent from 299.8bn/- in 2012, up to 348.6bn/- in 2013.

During the year, general insurance claims settled by insurers grew by 31.4 per cent to reach 218.8bn/-, up from 166.5bn/- in 2012. On the other hand, settled life assurance claims grew by 51.7 per cent from 14.3bn/- in 2012 to 21.7bn/- in 2013.

The challenges the industry is facing include lack of awareness of insurance matters among the public and shortage of qualified staff in the sector.

TIRA in collaboration with the Bank of Tanzania (BoT) are currently executing a vibrant public education campaigns through radio and television stations in various parts of the country.

The authority is also working closely with the University of Dar es Salaam for provisions of courses covering risk management and the government has been requested to sponsor Tanzanian students to study actuarial science abroad.

Actuarial science is the discipline that applies mathematical and statistical methods to assess risk in insurance, finance and other industries and professions.

Actuaries are professionals who are qualified in this field through education and experience. In many countries, actuaries must demonstrate their competence by passing a series of rigorous professional examinations.

Actuarial science includes a number of interrelating subjects, including probability, mathematics, statistics, finance, economics, financial economics and computer programming.

Historically, actuarial science used deterministic models in the construction of tables and premiums. The science has gone through revolutionary changes during the last 30 years due to the proliferation of high speed computers and the union of stochastic actuarial models with modern financial theory TIRA also expects the contribution of the industry to the country's GDP to grow from the current 1.0 per cent to 3.0 per cent within the next five years.

A five-year strategic plan by TIRA is expected to reach 526bn/- in 2014 and grow to reach 773bn/- in 2016 and up again to reach 1.4tri/- in 2019.