Kampala. Insurance companies in the country are moving closer to setting a pool of funds to insure risks in the oil sector. The insurers have given themselves a target of July, 2015 to have raised $1m (Shs2.9b) as initial capital for an insurance pool meant for the oil sector.
Mr Azim Tharani, CEO Goldstar Insurance and chairman of the Insurance Pool Uganda, at the Insurance CEO’s meeting last week said considering the huge risks involved in the sector, it would be better if insurance companies bring money together for oil.
“The premiums are juicy indeed, but the risks are high and can wipe out an entire insurance company,” he says.
In the Petroleum Act (Exploration, Development and Production) 2013, oil companies are required to look from within the country for insurance service before they are awarded an exploration licence.
“We must create a pool to maximise local content and this would lead to the long-term growth of the insurance industry. This decision of having the oil and gas pool has been arrived at because of the recommendation of people in the oil and gas industry in other parts of the world,” he added.
To join this pool, an insurance firm must purchase shares at a specified price. Mr Tharani said, there is no limitation on how much an insurance company can purchase.
However, an official from the Insurance Regulatory Authority noted that the $1m would not be enough and proposed it be increased to about $5m (Shs14.9b).
SOURCE: Daily Monitor