I refer to the letter in Stabroek News yesterday in which the Insurance Association of Guyana has spoken up. It is nice to see that my old association is taking a public stand in representation of the insurance industry and its capabilities, and in the process, correcting the false notion that Guyana is unprepared for so many things. People need to know that if there is one item of local content that our country is capable of handling, it is insurance and that it has been doing so successfully before anyone alive in the oil industry was born. The Demerara Mutual Life, for example, was formed in 1891. Let me repeat some lines from the TIGI statement published earlier this month in SN: ‘We said that we found a recent development … “quite consistent with the long trajectory of the unrolling of this relationship with the petroleum industry, which included pretending that the local insurance market cannot support the amount of insurance required to cover the environmental risk to which the country is certainly exposed in the face of the fact that:
1. Every insurance company in Guyana has a big brother called a re-insurance company with which it places the excess and has been placing excess business for over a century.
2. Every re-insurance company has a bigger brother called a retrocessionaire that shields it from the remaining risk, and that this robbed the economy of the flow of the premiums through it, and the information that would have enabled the society to corroborate the production information and also of the local content that it is probably best qualified to offer.
Perhaps I should add that this is no insignificant amount of money. I had estimated the amount to be at least US$1 billion in premium income from all classes of insurance including environmental damage. And this was with half the amount of discoveries. In “The man who saved Norway from oil” the Financial Times says “In 1952, the Iraq Petroleum Company had reluctantly agreed to train young Iraqis to work alongside its colonial-era masters (https://www.ft.com/content/99680a04-92a0-11de-b63b-00144feabdc0) These guys will always tell you a million reasons why your country cannot have a bigger piece of the action. Now, if the reason is not corruption, it has to be incompetence. One big area of incompetence is something called negotiation. Any time one has something, and another wants to exchange something for it, negotiation skills come in. The American corporate giants are past and present masters of the skill. They teach it in context as part of management training. What we did in Guyana is to destroy the only repository of such a skill – the unions. Over the past decade or more, we have got into the habit of simply bypassing the union and telling them take it or leave it. And we think we are doing fine. Not only would whatever residual negotiation skills in the union members atrophy with time since they are not used, but the skills of the government officials would have evaporated since they have no need of it. So, the Guyanese citizen is bearing the karma of a generational failure they know nothing about. There is nothing that exposes the damage to the country from the political fight ensuing than the failures to deal properly with the petroleum industry.
The unions and government may never have looked at it like that but that has to be the reality. An extract from this 3-year old article says it all: Pointing to a recent New York Times article which quotes GGMC Commissioner Newell Dennison as saying he had only nine technical persons responsible for regulating the sector, Mangal said such deficits in human resource capacity serve the oil companies’ interests. Said Mangal, “Sorry, the Ministry of Natural Resources has ZERO experienced O&G professionals working fulltime in Guyana. That is, not a single person with experience negotiating developments and experience overseeing developments (as opposed to exploration). Guyana needed dozens since 2015, but not a single one has been hired. And why? Because the oil companies benefit when Guyana does not have the capacity to look out for Guyanese interests. The oil companies benefit when Government institutions are weak.” This was 2018. 2021 is about to end. Who really pays a price for such incompetence? Why do we continue to celebrate the brilliance of our children only to produce results like these when it matters? These people at these oil companies who are being allowed to walk over our country cannot hold a candle to the majority of our students. I know. I taught some of them. We prepared them for export. With this kind of negotiation skill prevailing we will continue to export them. Editor, please permit me to quote from a January 2017 article from the Nigeria Guardian: “The National Insurance Commission (NAICOM), the industry regulator, has revealed plans to sanction operators that contravene the local content policy by ceding businesses offshore, without fully utilising local capacities in this 2017. The Commission revealed this in a circular titled: “Utilisation of In-Country Capacities of Nigerian Insurers, Reinsurers and Pool Prior to Foreign Facultative Reinsurance,” dated December 22, 2016, and signed by Director, Authorisation and Policy, NAICOM, Pius Agboola. The circular read in part, “The attention of the Commission has been drawn to recent practices in which insurance practitioners fail, neglect or refuse to consider and fully utilise relevant in-country capacities of insurance/reinsurance institutions such as pools, reinsurers and other approved local/recognised insurance capacities, prior to applying for approval to cede certain proportion of some risks offshore.
According to Agboola, “In some situations where the pools, insurers or reinsurers are offered participation, the institutions are either offered minimal proportion below their capacity or informally restricted and/or compelled to accept lower than their respective capacities for the purpose of justifying cession of the risks offshore.” He added that “this unethical practice which undermines our collective resolve to ensure full utilisation of available in-country capacity in line with domestication and the local content policy contravenes extant insurance laws and regulations and shall therefore not be tolerated henceforth.” https://guardian.ng/business-services/naicom-goes-harsh-on-insurers-over-local-content-infraction/ Nigeria had to insist that that country get a significant part of the insurance business. Will we, Guyanese, learn before the oil runs out?
Sincerely,
F. Collins
President
