The government has taken a final decision to withdraw from acquiring any additional shares in the Takoradi International Company (TICO), the operators of the Takoradi Aboadze Thermal Plant (TATP).
Abu Dhabi National Energy Company (TAQA) of the United Arab Emirates (UAE) own 90% shares in TICO, while the government owns the remaining 10%.
The new chief executive officer (CEO) of Volta River Authority (VRA), Kweku Andoh Awotwi, disclosed this at Akuse in the Eastern Region.
He noted that TAQA will continue holding its 90%, while the government of Ghana will also hold its current 10%.
According to him, the government’s decision to withdraw from the deal is to save enough funds to develop the power generating sector and also to allow the majority shareholder to fully run the company by investing more in the Aboadze Thermal Plant. “Any additional shares involve lots of money,” he added.
Awotwi indicated that with this new arrangement, the TAQA Company will increase the power generated from the Aboadze Thermal Plant from the current 220 megawatts to 330 megawatts, an addition of 110 megawatts.
The previous government expressed interest in acquiring an additional 40% shares in TICO in order to bring its total stake in the power plant to 50%.
The negotiations started when TAQA became a shareholder of TICO in May 2007 after concluding a deal with CMS Energy to acquire the assets of its subsidiary, CMS Generation, which included the latter’s equity stake in the Takoradi Aboadze Thermal Plant (TATP).
The then government was displeased with the TAQA-CMS Energy deal, which was quickly concluded just about the time the country was battling one of its worst energy crisis.
Readers would remember that the crisis ended September 2007, but it was not certain whether the country’s energy sector would not be faced with yet another energy crisis in the face of the then rising crude oil prices on the international market.
Government was not pleased with CMS decision to sell off its stake at the time it did. It thus decided to buy a controlling share of about 51% before the then offer was put on the negotiation table.
The two parties were working on very divergent interests, while government was bidding for more stakes in the power plant, TAQA was also seriously trying to buy off all of government’s stakes.
CMS Energy concluded the transaction of selling CMS Generation to TAQA by selling its shares for about US$900 million. Apart from its 90% stake in the TATP, other interests went to TAQA. These were the Jorf Lasfar Energy Company in Saudi Arabia and the ST CMS Company in India.
By Fred SARPONG
Monday, November 9, 2009
IMF to offer zero interest rate up to 2011
The International Monetary Fund (IMF) has announced that low-income countries of the organization, which include Ghana, will enjoy zero interest rates for all concessional loans up to the end of 2011.
Sayeh indicated that the IMF’s Executive Board approved this during their last meeting in the third quarter of this year.
Antoinette Sayeh, the director of the Africa Department, IMF, announced this when she paid a one-day visit to Ghana.
The visit offered her the opportunity to interact with the government officials and stakeholders in the financial sector.
According to her, from 2011, IMF will offer permanent lower interest rates and also bring in a new set of lending instruments, which will streamline conditions and at the same time strengthen their support to Sub-Saharan Africa.
The new IMF concessional lending commitments to low-income countries through mid-July 2009 reached US$2.9 billion compared with US$1.5 billion for the whole of 2008.
The IMF new support package includes mobilization of additional resources, including the sales of an agreed amount of IMF gold, to boost the Fund’s concessional lending capacity up to US$8 billion in the first two years and further to US$17 billion through 2014.
This exceeds the call by the Group of 20 (G-20) for US$6 billion in new lending over two to three years.
Other packages also include doubling of average loan access limits, an Extended Credit Facility (ECF) to provide flexible medium-term support, a Standby Credit Facility (SCF) to address short-term and precautionary needs and a Rapid Credit Facility (RCF), offering emergency support with limited conditionality.
Sayeh commended the government for its effort for stabilizing the economy, stating that the growth rate of between 4.5% and 5% of the Ghana’s Gross Domestic Product (GDP) for the period of 2009/2010 is on the low side, but believed that it would improve economic development and poverty reduction.
She said that under the Balance of Payment (BoP) lending arrangement and also the Special Drawing Rights (SDR), IMF has supported the country with US$603 million, specifically for BoP to strengthen the cedi.
At the July meeting, IMF backed a proposal for a new general allocation of $250 billion of SDR into the global economy, of which more than $18 billion will help bolster the foreign exchange reserves and relax the financing constraints of low-income countries.
By Fred SARPONG
Sayeh indicated that the IMF’s Executive Board approved this during their last meeting in the third quarter of this year.
Antoinette Sayeh, the director of the Africa Department, IMF, announced this when she paid a one-day visit to Ghana.
The visit offered her the opportunity to interact with the government officials and stakeholders in the financial sector.
According to her, from 2011, IMF will offer permanent lower interest rates and also bring in a new set of lending instruments, which will streamline conditions and at the same time strengthen their support to Sub-Saharan Africa.
The new IMF concessional lending commitments to low-income countries through mid-July 2009 reached US$2.9 billion compared with US$1.5 billion for the whole of 2008.
The IMF new support package includes mobilization of additional resources, including the sales of an agreed amount of IMF gold, to boost the Fund’s concessional lending capacity up to US$8 billion in the first two years and further to US$17 billion through 2014.
This exceeds the call by the Group of 20 (G-20) for US$6 billion in new lending over two to three years.
Other packages also include doubling of average loan access limits, an Extended Credit Facility (ECF) to provide flexible medium-term support, a Standby Credit Facility (SCF) to address short-term and precautionary needs and a Rapid Credit Facility (RCF), offering emergency support with limited conditionality.
Sayeh commended the government for its effort for stabilizing the economy, stating that the growth rate of between 4.5% and 5% of the Ghana’s Gross Domestic Product (GDP) for the period of 2009/2010 is on the low side, but believed that it would improve economic development and poverty reduction.
She said that under the Balance of Payment (BoP) lending arrangement and also the Special Drawing Rights (SDR), IMF has supported the country with US$603 million, specifically for BoP to strengthen the cedi.
At the July meeting, IMF backed a proposal for a new general allocation of $250 billion of SDR into the global economy, of which more than $18 billion will help bolster the foreign exchange reserves and relax the financing constraints of low-income countries.
By Fred SARPONG
Saturday, October 17, 2009
Board makes input into investment regulations
By Fred SARPONG
The Board of Directors of the Ghana Investment Promotion Centre (GIPC), chaired by Ishmael Yamson, has made inputs into the new draft of the GIPC regulations, which are under review.
The Chief Executive Officer (CEO) of GIPC, George Aboagye, speaking at news briefing in Accra last week, said the board had directed the centre to include the vision of the country in the draft document.
He said they also called for the inclusion in the document the government’s objective of creating more jobs for Ghanaians, especially the youth.
Aboagye indicated that the board also expects that the new regulations will measure up to the current impact of the economy in order to assess the future economic situation of the country.
BusinessWeek learnt that the board said the regulations must be responsive to the needs of the local firms, as well as those of the foreign companies.
The new regulations, GIPC Act 2008, will replace the GIPC 1994 Law.
As a result of these inputs from the board, the centre will hold several meetings with stakeholders before the board takes a critical look at the final document, after which it will be sent to Cabinet for consideration and approval.
The draft document was supposed to be ready by the end of the 3rd quarter of this year, and then sent to Cabinet for scrutiny, but got delayed.
The CEO said even though the review of the document made specific points in the interest of Ghanaian businesses, especially those in the retail sector, the government was acting carefully so that there will be no conflict between Ghanaian and foreign traders.
The careful study of the document by the new administration of the centre is to give a broad room to both local and foreign investors to operate and do business in the country.
However, the proposed regulations want joint venture investment capital to increase from US$10,000 to US$250,000 while investment capital for a firm which is 100% foreign owned to be increased from US$50,000 to US$500,000.
The proposed new law stipulates that investors who will invest in the trading sector will now be required to bring in US$1,000,000, as against the previous amount of US$300,000.
Under the proposed regulations, retail investors are required to employ at least 20 Ghanaians, double the minimum of 10 stipulated under the old law, while 25% of products content must originate from Ghana.
Before the proposed law was sent to Cabinet late last year, it drew protests from foreigners operating in various segments of the services and retail industries.
They claimed the reviewed regulations would hinder foreign investment.
The Board of Directors of the Ghana Investment Promotion Centre (GIPC), chaired by Ishmael Yamson, has made inputs into the new draft of the GIPC regulations, which are under review.
The Chief Executive Officer (CEO) of GIPC, George Aboagye, speaking at news briefing in Accra last week, said the board had directed the centre to include the vision of the country in the draft document.
He said they also called for the inclusion in the document the government’s objective of creating more jobs for Ghanaians, especially the youth.
Aboagye indicated that the board also expects that the new regulations will measure up to the current impact of the economy in order to assess the future economic situation of the country.
BusinessWeek learnt that the board said the regulations must be responsive to the needs of the local firms, as well as those of the foreign companies.
The new regulations, GIPC Act 2008, will replace the GIPC 1994 Law.
As a result of these inputs from the board, the centre will hold several meetings with stakeholders before the board takes a critical look at the final document, after which it will be sent to Cabinet for consideration and approval.
The draft document was supposed to be ready by the end of the 3rd quarter of this year, and then sent to Cabinet for scrutiny, but got delayed.
The CEO said even though the review of the document made specific points in the interest of Ghanaian businesses, especially those in the retail sector, the government was acting carefully so that there will be no conflict between Ghanaian and foreign traders.
The careful study of the document by the new administration of the centre is to give a broad room to both local and foreign investors to operate and do business in the country.
However, the proposed regulations want joint venture investment capital to increase from US$10,000 to US$250,000 while investment capital for a firm which is 100% foreign owned to be increased from US$50,000 to US$500,000.
The proposed new law stipulates that investors who will invest in the trading sector will now be required to bring in US$1,000,000, as against the previous amount of US$300,000.
Under the proposed regulations, retail investors are required to employ at least 20 Ghanaians, double the minimum of 10 stipulated under the old law, while 25% of products content must originate from Ghana.
Before the proposed law was sent to Cabinet late last year, it drew protests from foreigners operating in various segments of the services and retail industries.
They claimed the reviewed regulations would hinder foreign investment.
Africa export revenues to decline
By Fred SARPONG
Africa export revenue is expected to fall to US$251 billion in 2009 because of the global financial crisis. The affected African countries are mainly the members of World Trade Organization (WTO).
Similarly, oil exporting countries will take the biggest hit, with a shortfall of US$200 billion in 2009.
Dr. Sibry Tapsoba, Head, African Development Institute at the African Development Bank (AfDB), announced this at the 6th Trade Policy Course in Accra last week.
The course was organized by the World Trade Organization (WTO), the Economic Commission for Africa (ECA) and the African Development Bank.
The training course brought together over 100 participants from most of the African countries, including the host Ghana.
Dr. Tapsoba indicated that with exports declining faster than imports, trade balance will deteriorate in most countries.
Exports for 2009 and 2010 have been revised downwards by 40%. As a result, from a comfortable overall current account surplus of 2.7% of Gross Domestic Product (GDP) for both 2008 and 2007, the continent will record an overall deficit of 4.3% of GDP in 2009.
He reiterated that the continent has been severely hit by the financial crisis, with its growth rate forecasted to be at 2.8% in 2009.
Sub-Sahara Africa is expected to grow at 2.5% while middle income countries have been hit severely due to their relatively higher integration into the global economy.
He added that the slowdown in growth is primarily due to a decline in trade-flow.
Africa has made significant and continuous progress in economic growth, as evidenced by the average annual rate of 5.8% before the occurrence of the economic and financial crises.
This relatively good result has been attributed to various reforms undertaken by African governments to stabilize and liberalize their economies as well as stimulate growth.
However, despite substantial progress in reforming the overall policy environment, Dr. Tapsoba said it would appear that many African countries may not achieve the Millennium Development Goals (MDGs).
The reason is partly attributable to a lack of capacity in public and private sectors in Africa, which has been acknowledged as a major impediment to the attainment of poverty reduction goals.
Dr. Tapsoba has said that “it is therefore evident that no matter the amount of financial resources mobilization for Africa’s development, such funds would yield only limited or modest results if countries do not have the human, organizational and institutional capacity to absorb and effectively utilize them.”
He indicated that for the majority of the countries trade represents the means to overcome the structures of small economics on Africa’s development.
According to him, the emerging development paradigm in Africa sees trade, especially exports, as the engine of economic growth and development.
He noted that trade is of paramount importance and positioning Africa in the Multilateral Trading System is indeed one of Africa’s greatest challenges today.
Dr. Tapsoba said in spite of the importance of trade in Africa’s development, its performance over the past three decades has not been impressive.
He emphasized that the continent’s share in international trade has declined from over 5% in the 1970s to less than 2% today, resulting in the marginalization of the continent in the international arena.
In addition, the continent’s share in commercial services is also flat at 2% of world export over the last two decades.
“A number of factors have contributed to Africa’s declining trade share, including external and internal trade barriers, which include supply-side capacity constraints and ‘behind-the-border’ problem,” said Dr. Tapsoba.
Africa export revenue is expected to fall to US$251 billion in 2009 because of the global financial crisis. The affected African countries are mainly the members of World Trade Organization (WTO).
Similarly, oil exporting countries will take the biggest hit, with a shortfall of US$200 billion in 2009.
Dr. Sibry Tapsoba, Head, African Development Institute at the African Development Bank (AfDB), announced this at the 6th Trade Policy Course in Accra last week.
The course was organized by the World Trade Organization (WTO), the Economic Commission for Africa (ECA) and the African Development Bank.
The training course brought together over 100 participants from most of the African countries, including the host Ghana.
Dr. Tapsoba indicated that with exports declining faster than imports, trade balance will deteriorate in most countries.
Exports for 2009 and 2010 have been revised downwards by 40%. As a result, from a comfortable overall current account surplus of 2.7% of Gross Domestic Product (GDP) for both 2008 and 2007, the continent will record an overall deficit of 4.3% of GDP in 2009.
He reiterated that the continent has been severely hit by the financial crisis, with its growth rate forecasted to be at 2.8% in 2009.
Sub-Sahara Africa is expected to grow at 2.5% while middle income countries have been hit severely due to their relatively higher integration into the global economy.
He added that the slowdown in growth is primarily due to a decline in trade-flow.
Africa has made significant and continuous progress in economic growth, as evidenced by the average annual rate of 5.8% before the occurrence of the economic and financial crises.
This relatively good result has been attributed to various reforms undertaken by African governments to stabilize and liberalize their economies as well as stimulate growth.
However, despite substantial progress in reforming the overall policy environment, Dr. Tapsoba said it would appear that many African countries may not achieve the Millennium Development Goals (MDGs).
The reason is partly attributable to a lack of capacity in public and private sectors in Africa, which has been acknowledged as a major impediment to the attainment of poverty reduction goals.
Dr. Tapsoba has said that “it is therefore evident that no matter the amount of financial resources mobilization for Africa’s development, such funds would yield only limited or modest results if countries do not have the human, organizational and institutional capacity to absorb and effectively utilize them.”
He indicated that for the majority of the countries trade represents the means to overcome the structures of small economics on Africa’s development.
According to him, the emerging development paradigm in Africa sees trade, especially exports, as the engine of economic growth and development.
He noted that trade is of paramount importance and positioning Africa in the Multilateral Trading System is indeed one of Africa’s greatest challenges today.
Dr. Tapsoba said in spite of the importance of trade in Africa’s development, its performance over the past three decades has not been impressive.
He emphasized that the continent’s share in international trade has declined from over 5% in the 1970s to less than 2% today, resulting in the marginalization of the continent in the international arena.
In addition, the continent’s share in commercial services is also flat at 2% of world export over the last two decades.
“A number of factors have contributed to Africa’s declining trade share, including external and internal trade barriers, which include supply-side capacity constraints and ‘behind-the-border’ problem,” said Dr. Tapsoba.
Friday, October 2, 2009
New BoG Governor not set for immediate reforms
The new Governor of Ghana’s central bank, the Bank of Ghana (BoG), does not intend to make any immediate radical changes in the country’s fiscal regime inspired by former governor Dr Paul Acquah.
The central bank under the eight-year leadership of Dr Acquah introduced key reforms including the redenomination of the cedi and inflation targeting, to consolidate the banking sector and the economy.
But in his first ever interview with Joy Business after being named governor, the new central bank boss, Dr Kwesi Bekoe Amissah-Arthur said he would confer with his research team to strengthen the policies already running the system but hinted he is open to alternatives.
“We are in a stable evolving situation, there is not going to be major reversals of policy immediately,” he told Joy Business editor Fred Avornyo.
Dr Amissah-Arthur, who started work September 01, 2009, also appears to have an open mind towards the use of the prime rate to fight inflation.
“Basically, the question we are asking is that if inflation targeting has failed to achieve the result of bringing inflation down to single digit then shouldn’t we look other instruments? …yes we’ll look for other instruments, we’ll examine all the possibilities and, given the targets that we have, we’ll look at the policies, we’ll look at the instruments that can achieve them.”
Prime rate dip
Dr Amissah-Arthur has also expressed optimism the prime rate – which underlines the base rates charged by commercial banks – could drop even further.
A decrease in the prime rate, which currently stands at 18.50%, means a dip in the interest rates charged by the commercial banks on loans.
Dr Amissah-Arthur said the prime rate, which is fixed by the Monetary Policy Committee (MPC) of BoG, could “go down some more because energy prices are stable” while food prices are also expected to drop during this time of the year.
The new BoG Governor has served in many capacities including Deputy Minister of Finance in the NDC administration from April 1993 to March 1997 and after retiring from public office has worked on a number of consultancy assignments.
Story by Fiifi Koomson/Myjoyonline.com/Ghana
The central bank under the eight-year leadership of Dr Acquah introduced key reforms including the redenomination of the cedi and inflation targeting, to consolidate the banking sector and the economy.
But in his first ever interview with Joy Business after being named governor, the new central bank boss, Dr Kwesi Bekoe Amissah-Arthur said he would confer with his research team to strengthen the policies already running the system but hinted he is open to alternatives.
“We are in a stable evolving situation, there is not going to be major reversals of policy immediately,” he told Joy Business editor Fred Avornyo.
Dr Amissah-Arthur, who started work September 01, 2009, also appears to have an open mind towards the use of the prime rate to fight inflation.
“Basically, the question we are asking is that if inflation targeting has failed to achieve the result of bringing inflation down to single digit then shouldn’t we look other instruments? …yes we’ll look for other instruments, we’ll examine all the possibilities and, given the targets that we have, we’ll look at the policies, we’ll look at the instruments that can achieve them.”
Prime rate dip
Dr Amissah-Arthur has also expressed optimism the prime rate – which underlines the base rates charged by commercial banks – could drop even further.
A decrease in the prime rate, which currently stands at 18.50%, means a dip in the interest rates charged by the commercial banks on loans.
Dr Amissah-Arthur said the prime rate, which is fixed by the Monetary Policy Committee (MPC) of BoG, could “go down some more because energy prices are stable” while food prices are also expected to drop during this time of the year.
The new BoG Governor has served in many capacities including Deputy Minister of Finance in the NDC administration from April 1993 to March 1997 and after retiring from public office has worked on a number of consultancy assignments.
Story by Fiifi Koomson/Myjoyonline.com/Ghana
Military training for National Service personnel
All national service persons from next year will undergo military training before being dispatched to work at their various stations.
The National Service Secretariat (NSS) said this will equip the personnel physically and mentally, as well as instil in them a sense of patriotism they are expected to acquire at the end of the service.
The Executive Secretary of the secretariat, Mr Vincent Senam Kuagbenu said this in an interview with the press in Accra.
He said his outfit is simply responding to calls to bring back a useful component of the scheme when it was started.
Mr Kuagbenu said the secretariat is currently working on the modalities to ensure a smooth take-off of the programme but hinted the budget for it is huge.
Meanwhile, the NSS has deployed 230 national service persons to assist Members of Parliament (MPs) in the performance of their duties.
The secretariat said the service personnel are expected to conduct researches to facilitate the job of the MPs they are assigned to.
Kuagbenu explained that the move is in fulfilment of a promise by President Mills to get graduates to assist the MPs.
“I don’t expect to see parliamentary research assistants sitting in Parliament, that is not the work of a research assistant,” he said.
He said MPs have for long been unable to scrutinise bills before they are passed into laws because the legislators have had no assistants to help them with their work.
The NSS has posted a total of 60,700 personnel to serve in various sectors including education, health and the private sector.
Source: Joy News/Myjoyonline.com/Ghana
The National Service Secretariat (NSS) said this will equip the personnel physically and mentally, as well as instil in them a sense of patriotism they are expected to acquire at the end of the service.
The Executive Secretary of the secretariat, Mr Vincent Senam Kuagbenu said this in an interview with the press in Accra.
He said his outfit is simply responding to calls to bring back a useful component of the scheme when it was started.
Mr Kuagbenu said the secretariat is currently working on the modalities to ensure a smooth take-off of the programme but hinted the budget for it is huge.
Meanwhile, the NSS has deployed 230 national service persons to assist Members of Parliament (MPs) in the performance of their duties.
The secretariat said the service personnel are expected to conduct researches to facilitate the job of the MPs they are assigned to.
Kuagbenu explained that the move is in fulfilment of a promise by President Mills to get graduates to assist the MPs.
“I don’t expect to see parliamentary research assistants sitting in Parliament, that is not the work of a research assistant,” he said.
He said MPs have for long been unable to scrutinise bills before they are passed into laws because the legislators have had no assistants to help them with their work.
The NSS has posted a total of 60,700 personnel to serve in various sectors including education, health and the private sector.
Source: Joy News/Myjoyonline.com/Ghana
Tuesday, September 29, 2009
Insurance C’ssion ceases issuing new licenses
By Fred SARPONG
The National Insurance Commission (NIC), the regulator of the insurance industry, intends to put on hold the issuing of any additional license to prospective insurance investors, as it prepares to map out strategies to strengthen the industry.
In an interview with Isaac Yaw Buabeng in Accra, Head of Marketing, Research and External Relation at the NIC, he indicated that the decision taken by the commission is to make the industry a viable sector for both investors and beneficiaries.
Even though the commission has received some applications from prospective investors, Buabeng said the applications are being put on hold until the commission realizes that the sector is ready for more insurance companies.
As to whether the commission is okay with the minimum stated capital of US$1 million for the companies, Buabeng said that Ghana’s insurance industry is too young to witness such an increase as compared to the Nigeria insurance industry which stated minimum capital stands at US$15 million.
But he quickly added that the commission is asking all the existing insurance companies which want to enter into the oil and gas business should increase their minimum stated capital from the usual US$1 million to US$5 million. “This is because the oil and gas industry business involves a lot of risk,” said Buabeng.
The insurance industry in Ghana has positioned itself to write the oil and gas business. The industry has formed a consortium so that the business is written on co-insurance basis.
The insurance companies will participate in the business according to the strength of their balance sheet. This is done so that the companies can match the liabilities with their assets.
At the end of the day a greater percentage of the business will go into reinsurance until the companies build the required capacity.
After the shares by the Consortium of Insurance Companies, the excess will be reinsured with reinsurance companies on the international market.
A typical package policy is said to be structured with several sections and could be placed as a policy for one unit for one drilling contract or more typically an annual policy for the assured fleet.
A significant proportion of underwriting capacity is also available from the oil companies themselves through the participation of their captive insurance companies. As the oil company grows, building up its market capitalization and developing a spread of assets in different geographical areas, it is able to retain more of its own risks. It is usual for an oil company to self-insure this risk through the establishment of a captive insurance company.
The captive will generally be located in a country where it can be administered in a tax-efficient manner and will be responsible for accepting premiums for the share of risk written by the captive and paying claims there on.
Nowadays captives owned by large multinational companies in the oil sector or otherwise are sophisticated organizations and may participate in various levels of its parent’s programme and may have its own reinsurance network.
The National Insurance Commission (NIC), the regulator of the insurance industry, intends to put on hold the issuing of any additional license to prospective insurance investors, as it prepares to map out strategies to strengthen the industry.
In an interview with Isaac Yaw Buabeng in Accra, Head of Marketing, Research and External Relation at the NIC, he indicated that the decision taken by the commission is to make the industry a viable sector for both investors and beneficiaries.
Even though the commission has received some applications from prospective investors, Buabeng said the applications are being put on hold until the commission realizes that the sector is ready for more insurance companies.
As to whether the commission is okay with the minimum stated capital of US$1 million for the companies, Buabeng said that Ghana’s insurance industry is too young to witness such an increase as compared to the Nigeria insurance industry which stated minimum capital stands at US$15 million.
But he quickly added that the commission is asking all the existing insurance companies which want to enter into the oil and gas business should increase their minimum stated capital from the usual US$1 million to US$5 million. “This is because the oil and gas industry business involves a lot of risk,” said Buabeng.
The insurance industry in Ghana has positioned itself to write the oil and gas business. The industry has formed a consortium so that the business is written on co-insurance basis.
The insurance companies will participate in the business according to the strength of their balance sheet. This is done so that the companies can match the liabilities with their assets.
At the end of the day a greater percentage of the business will go into reinsurance until the companies build the required capacity.
After the shares by the Consortium of Insurance Companies, the excess will be reinsured with reinsurance companies on the international market.
A typical package policy is said to be structured with several sections and could be placed as a policy for one unit for one drilling contract or more typically an annual policy for the assured fleet.
A significant proportion of underwriting capacity is also available from the oil companies themselves through the participation of their captive insurance companies. As the oil company grows, building up its market capitalization and developing a spread of assets in different geographical areas, it is able to retain more of its own risks. It is usual for an oil company to self-insure this risk through the establishment of a captive insurance company.
The captive will generally be located in a country where it can be administered in a tax-efficient manner and will be responsible for accepting premiums for the share of risk written by the captive and paying claims there on.
Nowadays captives owned by large multinational companies in the oil sector or otherwise are sophisticated organizations and may participate in various levels of its parent’s programme and may have its own reinsurance network.
Subscribe to:
Posts (Atom)
