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Energy and Power Insurance in Nigeria

  • September 2015
  • -
  • Finaccord
  • -
  • 40 pages

Energy and Power Insurance in Nigeria is a report and market data file about the current and future outlook for the insurance of risks associated with the fast-evolving energy (oil and gas) and power sector in Nigeria.

In addition to showing how its value has changed since 2010, analysis of the Nigerian energy insurance market sub-divides it both by type of operation (i.e. upstream, midstream and downstream) and by type of risk (i.e. business interruption, construction, control of well / OEE, environmental liability, general liability, property and other) with these two splits then cross-tabulated against each other to identify the most valuable market segments. In addition, its value (split by type of operation) is forecast to 2018 and estimates for the market shares of energy insurance underwriters are provided, expressed as percentage ranges (e.g. 5.0% to 7.5%).

Market value data spanning 2010 to 2014 (with a forecast to 2018) is also provided for the Nigerian power insurance sector with segmentations in this case provided by power source at both a high level (i.e. conventional, renewable, other) and a detailed level (i.e. coal, gas, nuclear and oil in the conventional segment, and biomass, hydro, solar and wind in the renewable segment), as well as by type of risk (i.e. business interruption, construction, liability, property and other). Once again, these splits are cross-tabulated against each other and market shares for underwriters of power insurance are estimated as percentage ranges.

Over and above this unique market data, the study also examines the market drivers for both energy and power insurance in Nigeria (e.g. trends in oil and natural gas production and imports, trends in power generation segmented by source) plus the role played by captive and mutual underwriters (including the approximate percentage of the respective market values that they insure). In addition, it identifies the brokers with the most significant involvement in these two sectors, and considers how changes in the underlying energy and power sectors are likely to impact the associated insurance markets.

Table Of Contents

Energy and Power Insurance in Nigeria
TABLE OF CONTENTS
00 EXECUTIVE SUMMARY 1
10 INTRODUCTION 3
What is this report about and what is its rationale? 3
Several factors underpin the rationale for producing global research about energy and power insurance… 3
… including its worldwide value of more than USD 235 billion in 2014… 3
… and the growth of hydraulic fracturing (fracking), deepwater drilling, solar power and wind power 3
Methodology 3
Research program 3
Sources 3
Definitions 4
Energy (oil and gas) insurance 4
The energy insurance market segments between the upstream, midstream and downstream sectors… 4
… and by several types of cover, including one specific to upstream insurance 4
Power insurance 4
Power insurance covers the conventional, renewable and other power sectors 4
Premiums 5
Abbreviations 5
Finaccord 5
20 ENERGY (OIL AND GAS) INSURANCE 7
Energy (oil and gas) market and competitor background 7
Production, imports and associated infrastructure 7
Both oil and natural gas production have stagnated in recent years 7
… albeit the number of offshore rigs and platforms has increased quite substantially 9
Both the upstream and midstream sectors will require significant investment in future years… 10
… while downstream investment is expected to be modest 10
Oil and natural gas production in Nigeria faces numerous structural and political challenges 10
Competitive environment 11
Most energy companies are involved in upstream exploration and production… 11
… with midstream assets largely controlled by a few large upstream firms 11
Energy (oil and gas) insurance market value, growth and segmentation 11
In nominal terms, energy insurance premiums grew by around 14% per annum from 2010 to 2014… 11
… with construction the most valuable segment of the market in the latter year 13
Cover for control of well / OEE risks is compulsory for deepwater projects in the Gulf of Guinea… 13
… causing it to be the most valuable segment within the upstream energy insurance market 14
Energy insurance market growth has been boosted most by an increase in deepwater activity 15
Midstream premiums account for a relatively small proportion of the total market 15
The downstream insurance market has delivered the weakest growth in premiums 15
Underwriter market shares 16
Upstream, midstream and downstream insurance 16
Leadway is the market leader in the Nigerian energy insurance sector… 16
… the competitive structure of which is heavily influenced by local regulations 16
Captive underwriters account for a fairly substantial share of the market 16
Well over 50% of energy insurance premiums are reinsured, mainly to underwriters at Lloyd's of London 16
Broker market shares 18
The market for energy insurance broking in Nigeria is relatively concentrated 18
Future outlook 20
Oil and natural gas production 20
… although the energy insurance market value is likely to grow rapidly under all scenarios… 22
with the further development of deepwater activity a key driver in this respect 22
The possible introduction of the Petroleum Industry Bill could have a significant impact 22
30 POWER INSURANCE 25
Power market and competitor background 25
Power generation 25
Natural gas and hydropower account for virtually all electricity generation in Nigeria 25
Broadening electricity supply represents a high priority for the Nigerian government… 27
… with ambitious future plans for both conventional and renewable power production 28
Competitive environment 28
More than 80 companies are involved in power generation, distribution and transmission… 28
… including ‘Gencos' and ‘Discos' 28
Power insurance market value, growth and segmentation 29
The Nigerian power insurance sector was worth around USD 51 million in premiums in 2014… 29
… with cover bought for hydropower installations accounting for about 40% of this figure 30
Market growth has occurred mainly as a result of rising premiums for conventional power stations 31
By type of cover, construction is the most valuable segment within the total power insurance market… 31
… and this is likely to be the case in both the conventional and renewable sectors 32
Power insurance underwriter market shares 33
The leading energy insurance underwriters are also the leaders in power insurance… 33
Broker market shares 35
… with the same dynamic applying to brokers 35
Future outlook 37
Power generation 37
Nigerian power generation is expected to grow rapidly as the country seeks to meet consumer demand… 37
Power insurance 39
… and this will translate through to a significant rise in the value of the associated insurance market 39

LIST OF GRAPHICS / TABLES

00 EXECUTIVE SUMMARY 1
Key market data for energy (oil and gas) and power insurance in Nigeria 2
10 INTRODUCTION 3
20 ENERGY (OIL AND GAS) INSURANCE 7
Oil production and imports in Nigeria, 2010 to 2014 7
Natural gas production and imports in Nigeria, 2010 to 2014 8
Oil and natural gas production (segmented between domestic consumption and exports) and imports in Nigeria, 2010 to 2014 (table) 9
Underlying oil and natural gas production and import infrastructure in Nigeria, 2010 to 2014 (table) 10
Energy (oil and gas) insurance premiums in Nigeria segmented between upstream, midstream and downstream, 2010 and 2014 12
Energy (oil and gas) insurance premiums in Nigeria segmented between upstream, midstream and downstream, 2010 and 2014 (table) 12
Energy (oil and gas) insurance premiums in Nigeria segmented by type of risk, 2014 13
Energy (oil and gas) insurance premiums in Nigeria cross-tabulated between upstream, midstream and downstream, and by type of risk, 2014 14
Energy (oil and gas) insurance premiums in Nigeria cross-tabulated between upstream, midstream and downstream, and by type of risk, 2014 (table) 15
Estimated market shares of total energy (oil and gas) insurance underwriters in Nigeria, 2014 17
Estimated market shares of total energy (oil and gas) insurance underwriters in Nigeria, 2014 (table) 18
Estimated market shares of total energy (oil and gas) insurance brokers in Nigeria, 2014 19
Estimated market shares of total energy (oil and gas) insurance brokers in Nigeria, 2014 (table) 20
Oil and natural gas production in Nigeria, 2018 (forecast) (low and high oil price scenarios) 21
Oil and natural gas production in Nigeria, 2018 (forecast) (low and high oil price scenarios) (table) 21
Energy (oil and gas) insurance premiums in Nigeria segmented between upstream, midstream and downstream, 2018 (forecast) (low and high oil price scenarios) 23
Energy (oil and gas) insurance premiums in Nigeria segmented between upstream, midstream and downstream, 2018 (forecast) (low and high oil price scenarios) (table) 24
30 POWER INSURANCE 25
Power generation in Nigeria segmented between conventional, renewable and other sources, 2010 to 2014 25
Power generation in Nigeria segmented between conventional, renewable and other sources, 2014 (detailed breakdown) 26
Power generation in Nigeria segmented between conventional, renewable and other sources, 2010 to 2014 (detailed breakdown) (table) 27
Power insurance premiums in Nigeria segmented between conventional, renewable and other sources, 2010 and 2014 29
Power insurance premiums in Nigeria segmented between conventional, renewable and other sources, 2010 and 2014 (table) 30
Power insurance premiums in Nigeria segmented between conventional, renewable and other sources, 2014 (detailed breakdown) 30
Power insurance premiums in Nigeria segmented by type of risk, 2014 31
Power insurance premiums in Nigeria cross-tabulated between conventional, renewable and other sources and type of risk, 2014 32
Power insurance premiums in Nigeria cross-tabulated between conventional, renewable and other sources and type of risk, 2014 (table) 33
Estimated market shares of total power insurance premiums of underwriters in Nigeria, 2014 34
Estimated market shares of total power insurance premiums of underwriters in Nigeria, 2014 (table) 35
Estimated market shares of total power insurance brokers in Nigeria, 2014 36
Estimated market shares of total power insurance brokers in Nigeria, 2014 (table) 37
Power generation in Nigeria segmented between conventional, renewable and other sources, 2018 (forecast) 38
Power generation in Nigeria segmented between conventional, renewable and other sources, 2018 (forecast) (table) 38
Power insurance premiums in Nigeria segmented between conventional, renewable and other sources, 2018 (forecast) 39
Power insurance premiums in Nigeria segmented between conventional, renewable and other sources, 2018 (forecast) (table) 40

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