Nigerian insurance companies have been urged to effectively adjust their rates as they have resolved to do in order not to fall into the murky waters of effects of a delayed action. This is coming on the heels of the local insurers resolve to tackle the spill over effects of the oil spill in the Gulf of Guinea, by raising their rating. This according to them is to curtail losses that arises from the spill especially against the background that insurance is a global business. This decision to jerk up rates is hinged on the presumed increase in cost of reinsurance in the international market, due to the millions of dollars claim which the British Petroleum (BP) paid on the oil spill in the Gulf of America and Mexico,
According to Adulphus Okezie, a financial analyst, “what affects America and Mexico and indeed any country in the world affects Nigeria as far as the impact of global insurance transactions concerned’, stressing that ‘local insurers would need to buy reinsurance treaties at the international market, including the affected countries” The business of insurance, he said cannot be detached from these world occurrences, noting that if Nigerian insurers fail to adjust their rates and make marginal profits in the process, the multiplier effect would take years to be redressed. Corroborating earlier position taken by experts in the industry, Okezie stated that oil and gas as well as aviation are businesses that fall within international standard. Therefore the decision by local insurers to raise their rates to cope with the spill over effects was a welcome development. He added that if for nothing at all, these insurers must buy their reinsurance cover from the international reinsurance companies. Experts predicted that this might some set back in the local content policy of the nation which seeks to retain the bulk of our underwriting business in the oil and gas sector within our shores. If not handled well, the implication is that insurance may likely sweat in huge production cost, which would have a reverberating effect on the industry.
It would be recalled that BP promised to pay all "legitimate" claims to people and businesses affected by the April 20 spill to which, workers' compensation, accident compensation, and/or accident injury claim associated, are involved. Recently, Mr Olusola Ladipo-Ajayi, the newly elected chairman of the Nigerian Insurers Association (NIA), said that the huge claims by BP on the Gulf Oil spill would, no doubt, hike the price of reinsurance. He explained that the occurrence would be taken into consideration for the losses that have been recorded, stating that this would affect the local market, since insurance operates globally and players operate in the same market with other nations. According to him "we should not be in illusion that we cannot be part of it because we are not Americans, we must bear in mind that we also purchase reinsurance cover from the same market. Instead, what we should do in anticipation of the likelihood of high reinsurance cost is to improve our rating, so that whatever the consequence will not have a serious impact on our production." BP promised to pay all "legitimate" claims to people and businesses affected by the April 20 spill to which, workers' compensation, accident compensation, and/or accident injury claim associated, are involved. Okezie therefore tasked the Nigerian Insurers Association to work in alliance with the National Insurance Commission (NAICOM) to ensure that whatever adjustment that is necessary is done on time and appropriately too in order to keep our insurers in profitable business.