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Insurance firms in Tanzania eye mega projects
22 insurance companies in Tanzania have formed a consortium 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. Khamis Suleiman, the CEO of Sanlam General Insurance Tanzania spoke to CNBC Africa.
Thu, 24 Nov 2022 14:54:19 GMT
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AI Generated Summary
- 22 insurance companies in Tanzania have formed a consortium to tackle high-risk oil and gas projects.
- The consortium allows insurers to retain a portion of the premium and build technical capabilities for complex risks.
- The current capacity of the consortium is up to 10 million US dollars, with plans to increase retention in the future.
In a groundbreaking move for the Tanzanian insurance industry, 22 insurance companies have joined forces to create a consortium aimed at tackling high-risk oil and gas projects in the region. The consortium, led by Phoenix and NAC, includes companies with varying shares ranging from 5 to 35. Khamis Suleiman, the CEO of Sanlam General Insurance Tanzania, explained the main objective of the consortium is to enable insurers to retain a portion of the premium, rather than fronting 100% of the risk as is the current practice. This move is crucial in enabling insurers to build technical capabilities to handle complex risks associated with mega projects. Suleiman highlighted that even in developed markets, no single insurer assumes 100% of the risk, with companies typically taking on portions ranging from 1% to 10%. The consortium's current capacity allows them to underwrite risks up to 10 million US dollars, with plans to increase their retention in the future. This approach will enable them to participate in significant projects such as the $30 billion Lindi’s Liquefied Natural Gas (LNG) project and the $3.5 billion East African Crude Oil Pipeline. While the Tanzanian insurance market faces challenges related to limited capital, the consolidation and collaboration seen through this consortium signal a potential increase in capacity and capability. In order to further boost capital, Suleiman explained that companies are exploring avenues such as retaining profits and engaging in strategic alliances like the recent mergers between Salama Insurance and Jubilee Insurance Tanzania. This trajectory is in line with the Insurance Regulatory Authority's target to increase the insurance penetration rate to 5% by 2030, a significant jump from the current 0.7%. Despite the ambitious target, the focus remains on continual improvement and growth in the market. Suleiman emphasized that the ultimate goal is not constrained by specific percentages but rather by the overall enhancement of insurance penetration and capacity in Tanzania.
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