Contrary to the perception that local companies did not have the capacity to insure any of the three Floating Production, Storage and Offloading (FPSOs) used in oil production, the Ghana Oil and Gas Insurance Pool (GOGIP) says it is up to the task.
The Pool, comprising of indigenous general insurers, explains that it currently provides complete insurance for all the three FPSOs- Kwame Nkrumah, John Evans Atta Mills and John Agyekum Kufuor, but reinsures the excess risk above its limit of retention.
The Technical Manager of the Ghana Oil and Gas Insurance Pool (GOGIP), Mr Faris Attrickie in an interview on March 2, said the GOGIP currently provided 100 per cent insurance for the FPSOs, per its mandate of being the only vehicle through which the upstream oil and gas insurance are to be insured.
“The pool is a conglomeration of general insurers in Ghana. All the general insurers subscribe to it, and we pool our capacities together. We are insuring 100 per cent because we are the exclusive vehicle through which the insurance must be done, it cannot be done through anybody,” he said.
Although the insurance of the FPSO, required huge capital, Mr Attrickie said the pool had a proper re-insurance system that helped to reinsure the excess risk above their limit of retention.
“It is not like we are not up to the task, once you have the reinsurance in place, you earn the capacity together with your reinsurers, to absorb the whole risk. We have world class reinsurers and they provide us the support. We take it on and the excess that is above our limit of retention, are properly reinsured,” he said.
Aggregation of risk
He explained that the reinsurance was done by foreign reinsurance companies because it was not prudent to retain all the risk locally.
“The pool has the money to pay all these but if the pool goes down then it means the subscribers go down. Therefore, if these things are insured, then it is not proper that we reinsure ourselves,” he said.
He added, “the liability that the pool takes on itself is for members who have subscribed, assuming there is a loss, it is borne by all the subscribers.”
Insurance for FPSO Kwame Nkrumah
In 2016, oil production from the Jubilee field slumped by over 50 per cent following a fault with the turret bearing on the Floating Production, Storage and Offloading (FPSO) Kwame Nkrumah.
He explained that the reinsurers had to pay for the insurance with the exception of the Business Interruption insurance, which covered the consequent loss of production and revenue for Tullow, the lead operator of the field.
Tullow Oil received a total of US$80million to cater for the losses the company suffered as a result of the fault.
The Ghana Oil and Gas Insurance Pool (GOGIP) comprising mostly general insurers are expected to pull together local resources to underwrite oil and gas risks in Ghana.
The formation of the pool was in accordance with the Petroleum (Local Content and Local Participation) Regulations 2013, (L.I. 2204) and the Insurance Act 2006, (Act 724) and seeks to give opportunity to local underwriting companies to take part in activities in the sector.