Contributions of Insurance in the Management of Risk in Nigeria Oil Industries

Contributions of Insurance in the Management of Risk in Nigeria Oil Industries

Abstract of Contributions of Insurance in the Management of Risk in Nigeria Oil Industries

This project is on the topic titled “The Insurance Contribution in the Management of Risk in Nigeria Oil Industry” The work is divided into five chapters. Chapter one deals with background of the study, statement of problems that led to the research work, objectives of the study the research questions, scope of the research questions, scope of the research question, scope of the research question, scope and limitations of the study, significance of the study and definition of operational terms. Chapter two covers review of related literature, historical development of the insurance, reasons for insurance business in Nigeria, type of drilling operations, various type of risk in oil industry and so on. Chapter three discusses research methodology including source of data and validity of the instruments. Chapter four covers findings and discussions of findings and chapter five covers conclusions and the recommendations.

Chapter One of Contributions of Insurance in the Management of Risk in Nigeria Oil Industries

INTRODUCTION

BACKGROUND OF THE STUDY

Nigeria’s economy before independence and shortly afterward largely depended on agriculture. This is because a good number of its citizens are farmers. Intact about 70% of the Nigerian populace then were basically farmers and this goes a long way to show that Nigerians are poor people. Agriculture then was her only source of foreign exchange through the sale of cash corps.

Shortly after independence and the civil war, Nigeria economy changed as a result of oil boom in the early 705. This caused the total neglect of is agricultural sector and other mineral resources which are blessed with, the boom attracted foreign investors in so many sectors, they includes, bank, insurance companies and oil producing companies etc. Among the early oil producing companies to exploit its shores of Nigeria include British Petroleum Company, Uni Petrol etc.

Petroleum is a product of crude oil which is found a black substance naturally underground.

The oil industry is an important aspect in the monetization process and industrial growth of all nations which serves as source of energy to most of the modern power generators and machineries.

Petroleum is also serves as sources of revenue and also contributing to the national output. But due to the fact that our country’s economy depends largely on oil and it’s by product based on chemicals derived from oil sector and natural gas. It is invariably pertinent that one should consider the risk involved and the types that the petroleum industry as a whole are exposed.

One should be thinking of the ways to reduce the risk involved both in the offshore and onshore operations. Insurance cover is an appropriate way of handling and reducing those risk exposures that the oil companies experience. The insurance companies have now the capacity to cover most of the risks being envisaged by the petroleum industry.

Insurance covers losses or destruction of properties, equipment and machineries. Insurance also essentially pays claims on fire out break, theft, oil spillage etc. or temporal disability and medical expense of the employee, or damage to their parties’ properties and make good any court judgment arising out of their general negligence of any sort.

Insurance most important function is the indemnifying of oil industry in any loss. It prevents the industry form being handicapped financially after any loss or to stop production.

STATEMENT OF THE PROBLEMS

The major problems that prompted the research of this work include the following:

Poor government control and monitoring of the business activities of oil and gas industry

Failure of the petroleum industry to understand the potential contribution of insurance business to wards effective and efficient risk management

Lack of awareness of high level of risk exposure to oil and gas sector especially that of offshore.

OBJECTIVE OF THE STUDY

The objective of the study includes the following:

To examine the potential contribution of insurance industry towards risk improvement and loss prevention/ reduction in oil and gas industry

To evaluate the problem facing Nigeria insurance industry in the management of risk expose to oil and gas sector

To evaluate the performance of Nigerian insurance industry in oil and gas sector

To assess the attendant risk in oil industry with a view to assessing the oil for available insurance cover.

RESEARCH QUESTIONS

Are their any problem/ challenges facing insurance industry in management of risk exposed to oil and gas sector?

Is the insurance protection provided by Nigerian insurance industry adequate to enhance the business activities of oil and gas sector?

Does insurance industry render any service to the oil and gas sector?

Is insurance a tool for risk improvement and loss stabilization in oil and gas sector?

Is Nigerian insurance industry capable of underwriting oil and gas risk?