22 insurance firms eye business in mega projects

Dar es Salaam. A consortium of 22 insurance companies in the nation has been formed to work on significant oil and gas projects, including the $30 billion Lindi’s Liquefied Natural Gas (LNG) project and the $3.5 billion East African Crude Oil Pipeline.

The consortium was launched on Wednesday night by Finance and Planning deputy minister Hamad Chande.

Speaking at the event, Mr Chande said the consortium is the first in the nation and that, unlike in the past, the government will make money from insurance fees.
He claimed that in the past, because the capital requirements for individual insurance businesses in the nation could not be met, oil and gas projects acquired foreign firms that provided riskier insurance instead.

“Due to these factors, the national income was lost because most of the investors in oil and gas signed contracts with foreign companies on risky insurance because of their financial muscles.

“I believe, through this consortium, outsourcing companies will now be able to take out their insurance to oil and gas projects whithin the country,” said Mr Chande.

He explained that, through the consortium, the insurance sector will increase its ability of withstanding such risks and helping the retention of fee funds in the country for the development of the nation.

“The need for this union began in 2019 towards 2020 after large projects such as the East African Crude Oil Pipeline project worth $3.5 billion and the LNG (Gas Processing Plant) project worth $30 billion and large projects on mining and agriculture.

“Due to the high value of the projects, risk insurance led to the need for general insurance that was mostly purchased from foreign insurance companies that benefited from huge sums of risk fees,” said Mr Chande.

“The small capital of local insurance companies led to the need for the creation of a consortium that aims to increase financial muscles against various oil and energy risks and as well retain fees to increase the national income,” he said.

For his part, Tanzania Insurance Commissioner Baghayo Saqware said the union makes the 22 companies pool capital and be able to withstand the risks of big projects including Lindi’s natural gas project that is expected to be implemented soon.

According to Mr Saqware, the consortium will have a number of advantages, including increased financial and professional capacity for insurance companies, increased internal storage and efficient risk management among insurance companies, protection of Tanzanians’ interests, increased internal capacity in accordance with legal requirements (local content requirement), and increased employment.

He said another advantage is to provide a fair, transparent and balanced arrangement by involving other insurance stakeholders in the oil and gas sector and increasing the knowledge and expertise of registering special risks insurance through the experience that will be gained in the oil and gas industry.

Meanwhile, the Chief Executive Officer of Phoenix Assurance, Mr Ashraf Musbally, said that within the next few weeks they will issue guidance to various stakeholders regarding their short and long term goals.

Mr Musbally stated that they are really happy to see that the industry’s stakeholders are in favour of their plan and that they think it would boost productivity in the growth of the insurance industry, particularly in terms of gas and oil.