‘Nigeria’s insurance liability pool to extend coverage in oil, gas risks’

As the nation’s insurance industry craves for more capacity to absorb big ticket risks, the importance of building capacity through pools is no longer in doubt. MODESTUS ANAESORONYE in this interview with Richard Borokini, chairman, Nigerian Liability Insurance Pool, looks at the pool and how far it has supported to manage third party liabilities in key segments of the market. Excerpts:

Nigerian Liability Insurance Pool is one of the pools that came into the market as a vehicle to build capacity, how has this pool fared in the last five years?

Nigerian Liability Insurance Pool is one of the pools that were formed some years ago by a group of insurance companies who pooled resources together to underwrite third party liability risks arising from motor accident, public and employment liability risks.

The pool has continued to deliver on its mandate since 2010 when it was inaugurated. It’s of note that the Nigerian Insurance Liability Pool is the only surviving pool in the market today, having followed market transformation exercises all these years.

Some of the pools that were formed at the same time and after the Nigerian Insurance Liability Pool have all gone. The Pool has a strong board made of chief executives of leading insurance companies in the market and an experienced management. They have both worked very hard in the last five years to sustain the company and enable it build needed capacity for third party liability risks especially in motor insurance.

Five years down the line, what is the size of this pool in terms of numbers?

In terms turnover, the pool is doing close to N1bn, that is premium generation from members businesses.

We know that the Pool has come to close a gap, what was the challenge before this pool was formed?

The challenge then was that of a growing third party liability risks and claims particularly on motor insurance and of course, nobody could predict the enormity over time. You are aware that there is compulsory Motor Third Party Insurance law in Nigeria which means that you must have a minimum third party cover.

This mean that you are liable to third party damage and depending on who is knocked down, that is what determines the damage you are going to pay. And if you are unfortunate to hit a substance or a public figure in the society, the claim could run into millions. So, to absorb this risk insurance companies under the pool contribute a portion of their premium that should such case arise they have where to fall back on.

In clear terms, explain third party liability risks?

Third party liabilities are risks that affect others who are not party to the insurance contract. For instance, you own a car and you have insured your car with the insurance company, but you have third parties who are not part of the contract and who may be affected by your action or what you do with the property.

For example, you have what is called a duty of care. What this means is that if you have a property, you have a duty of care to ensure that such property should not constitute a problem to others. Therefore, in other to protect yourself against these risks, you enter into contract with an insurance company that in the course of using this property and there is a third party damage my insurance company should step into your shoes and pay. A third party can benefit from an insurance contract from the negligence of the insured.

What is the membership strength of this pool?

Presently, we have 11 members. Don’t forget that the pool is an association of people who are of like minds or share the same vision. It is like a club. Nobody is forced to join, so people join at freewill depending on what the structure of their risk is and if they probably think they need the pool.

Other people are free to join, they are not restricted. The pool is dissolved every five years and after which many would like to join. For instance, by end of next year 2015, the pool will be dissolved and it will be an opportunity for those who want to join to do so. So, new members are welcomed from 2015.

What investment guidelines guide the operations of the pool?

Our investment guidelines are not different from that of the insurance companies. Don’t forget that we are owned by insurance companies who are regulated by the National Insurance Commission (NAICOM).

We underwrite short term risks, so, our investments are mostly short term so that when the need for cash arises we can easily convert. Mostly, our investments are in money deposit instruments, may be a few shares in blue ship quoted companies so that it would be easier for us to meet claims obligation when they arise.

Many Pools came up in the market and like a flame of fire they disappeared, what has been working for Nigerian Liability Insurance Pool?

For example, for the 2013 financial year, the pool paid claims total amounting to N353m and achieved an underwriting profit of N166m.

Out of that profit, we are paying dividend of N85m. What has made all these possible are the quality of our management as well as support of members companies who continued to cede their third party liability risks to the pool.

Beyond what you are doing presently, are you considering expanding the product chain?

We want to expand our product range in accordance with the agreement establishing the pool. Whatever we are doing is based on the agreement and we would not go beyond the specifics of the pool. We have mandated the management to look at other areas of the business including third party in oil and gas.