Nov 25, 2021 News
— plan submitted to policymakers
Kaieteur News – Local insurers have taken umbrage to recent ‘anecdotal’ observations made by a political scientist and Co-Founder of Americas Market Intelligence (AMI), Arthur Deakin, who recently lamented, as unrealistic, some of the requirements being demanded in Guyana’s proposed Local Content Policy for the oil and gas industry, specifically with regard insurance services.
Responding to Deakin’s assertions, the Insurance Association of Guyana (IAG) and the Guyana Insurance Brokers’ Association (GIBA)—two representative bodies of the local insurance underwriting and intermediary industries—pointed out with “extreme consternation,” that his critique of the local capacity of the domestic industry, was made despite no consultations with the industry representatives.
As such, IAG and GIBA, in a joint public missive observed that, “this gentleman, whose academic background is Political Science, has taken upon himself to pronounce upon the complex issues of capacity of the local insurance industry in opining that the latest Draft LCP was unrealistic, inter alia, with respect to Insurance.”
To this end, the representatives, said nowhere within Deakin’s critique was it revealed what research was conducted as to the ‘capacity’ of the local insurance industry. As such, the IAG and GIBA, which represent virtually 100 percent of the local industry, remain adamant that they were never consulted by Deakin and questioned. “Does he care to expand on what he understands to be Insurance Capacity within the complex context of the risk transfer mechanisms of Insurance, Reinsurance, and Retrocession?”
Further rubbishing Deakin’s arguments against Guyana’s domestic capacity, the two insurance representatives queried what did Deakin compute as the capacity of the local industry versus the required capacity that guided his conclusions” and that he should perhaps, “expand by directing us to where we may access his research.”
According to the requirements outlined as targets for local content in the industry with regard, Local Content, the draft policy stipulates, between 80 and 95 percent of categories of insurance services be provided by locals. These include local deposits, credit advances, and insurance.
According to the draft document prepared by the Ministry of Natural Resources, “over time, it is expected that local insurers would build more net capacity to insure larger industry risks.”
In so doing, the Ministry said, local insurers would be able to use reinsurance to guarantee itself 100 percent capacity for massive Oil and Gas risks from day one, and thereby be able to grow at a much faster rate to secure the industry.
Local companies, according to the Ministry, will grow because the reinsurers will pay commissions to the insurers, who in turn will apply these commissions to build capital reserves and hence, capacity for taking on more risks themselves. American based, political scientist, Deakin in his critique of Guyana’s Draft Local Content Policy (LCP) had intimated in one of his more recent columns, that the government, for example, expects that within 10 years, Guyanese firms should be used to cover 95 percent of the energy sector’s insurance risks. Deakin was keen to note that this alone is just not practical.
In responding to the lamentations by Deakin however, the IAG and GIBA said they have already articulated to policymakers and insurance regulators their position as to what extent Guyana’s Oil and Gas risks could be handled by the indigenous industry. To this end, “we have presented to them our model for the best approach to LCP participation for the indigenous insurance industry.”
The insurance representative bodies as such concluded that, “in a nutshell, once our model is established, the local industry is easily capable of arranging any level of insurance our Oil and Gas contractors may wish. We may start out as intermediaries and small participants in actual risk retention, but nothing stops us from handling the gamut of insurance needs.”
To this end, the IAG and GIBA said, its members have already developed the necessary technical resources and established linkages with the world’s leading players in Oil and Gas Insurance, “all of whom are ready and willing to work with us.” As such, “the IAG and GIBA therefore, roundly rejects what is evidently uninformed and unscholarly opinion making, especially in relation to matters of crucial importance to local industries.”
Deakin, who is a co-director of the Americas Market Intelligence group, had said that the incumbent administration “is aware of the issues such a high target for insurance would cause, since it indicated in the draft bill that it encourages joint ventures between local companies and “International Tier 1 Contractors” for this purpose. Deakin in his column had acknowledged that joint ventures (JVs) are a fundamental part of any liberalized, growing economy and can be highly effective at curtailing local shortages. He was keen to note however, that if too much control is given to either the local or foreign players, this can negatively impact collaboration.
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