Ghana based insurers are facing another round of recapitalisation requirements as the country's regulator attempts to create an industry capable of insuring the country's growing oil production.
Ghana is entering a new phase of economic development, according to the country's National Insurance Commission, with the country becoming a significant oil producer and attaining the status of a lower middle-income country.
In 2006 the National Insurance Commission (NIC) directed life and non-life companies to have a minimum core capital of $1m. It said that all 45 licensed insurers in Ghana had complied with this. Now the NIC is raising that minimum capital level to $5m for any insurers that want to underwrite policies in the oil and gas industry. The insurers have until December 2014 to comply. The NIC said that, although the new level was not mandatory, it was unlikely that any non-life insurer would want to pass up the opportunity to write such new business.
All insurers were reported by the Daily Graphic to have signed up to be part of a newly formed consortium to underwrite oil and gas sector risk. No single insurer in Ghana has the resources to underwrite oil and gas risk alone. Within that consortium the Ghana insurance sector has underwritten the Floating Production and Storage (FPSO) Kwame Nkrumah, which was bought for the commercial production of oil in the Jubilee oilfield off Cape Three Points. It was reported to have an insured value of $900m.
Total premium income in Ghana is about $400m a year, with the vast majority of that distributed amongst five players. Annual growth over the past five years has been running at about 30% per annum. The penetration rate is about 1.5%.
Ghana Insurance Association president Kwame-Gazo Agbenyadzie said that the recapitalisation was necessary, but would probably lead to a reduction in the number of players. "At the moment we have about 45 licensed companies, which is too many for a small country like Ghana", he said. Gazo also accepted that insurers faced a credibility gap with many consumers, with difficulties in getting paid experienced in some cases. "There are a lot of areas that we need to work on to improve the image of our industry, thereby ensuring growth and a substantial contribution to the economic development of our country".
A World Bank Report in 212 also concluded that 45 insurers was too great a number in a country with a population of just 26m.