The massive scale of Ghana's nascent oil and gas industry has posed a challenge to the country's insurance operators, requiring creative solutions to back the risk of highly valued energy firms.

When Kosmos confirmed that it had discovered oil reserves off Ghana's coast at the Jubilee Field in 2007, the country was elated. There were hopes that the new revenue would boost infrastructure development and social services. However, fears were voiced of the so-called Dutch Disease. The production of crude oil in commercial quantities began in December 2010 and it was hoped local firms from a host of sectors would all get a slice. Legislators knew that local content would not be the default outcome, however, and that it needed to be facilitated through legislation. With Tullow and ENI's projects coming shortly thereafter, Ghana's legislators duly tasked the stakeholders with exploring avenues for developing the local market's capacity to accommodate oil and gas insurance.

The National Insurance Commission (NIC) were the key leaders, and introduced legislation directing life and general insurance companies to have a minimum of $1 million in core capital. This legislation was again affirmed in the 2013 Local Content Act, which emphasized the need for entities engaged in petroleum activities in Ghana to comply with the provisions of the 2006 Insurance Act. This meant that insurable risks relating to petroleum activity had to be insured through an indigenous brokerage firm or reinsurance broker. Likewise, any person seeking to obtain an offshore insurance service relating to a petroleum activity in the country should obtain written approval from the NIC. In granting an approval for procuring insurance services offshore, the NIC has to ensure that Ghanaian local capacity has been fully exhausted.

In 2014, the NIC raised the capital requirements to $5 million for general insurance firms engaged in underwriting policies in the oil and gas industry. The protocol has created an opportunity for local insurance companies and intermediaries to play a leading role in Ghana's oil and gas business. The problem is that local insurers are too small to deliver the resources for the capital-intensive industry. With insurance penetration still struggling at 1.5% it is difficult for insurers to increase their capacity.

However, there are many international players in the ring. After a period of liberalization in the 1980s and 1990s, there was an increasing number of foreign insurers coming into the market by the early 2000s. There is now a plethora of local companies competing with players from Nigeria, South Africa, Cote D'Ivoire, Cameroon, and Germany.

At a 2015 conference, the discussion was focused on the need for Ghanaian companies to fortify their balance sheets in order to compete with international operators. Thus far, most efforts to encourage local insurance participation have resulted in pooled efforts. Even before the 2013 local content legislation, in 2006 the National Population Council (NPC) and the NIC joined forces with the Ghana Oil and Gas Insurance Pool (GOGIP) to pool their resources and underwrite oil and gas risks in Ghana. Insurers did so in 2007 to underwrite the Jubilee Field, but were only able to provide for 0.8% of the operations. The same happened again in 2009 when 21 non-life members of Ghana Insurers Association formed a consortium to underwrite oil and gas industry risks, in-line with the government's focus on leveraging growth from hydrocarbon deposits. In the last quarter of 2010, when Ghana commenced the production of crude oil in commercial quantities, non-life insurance companies came together to pool their capacities in the form of a consortium to underwrite the oil and gas business. The problem remains, however, that in order to underwrite oil and gas sector risk, which tends to be beyond Ghana's insurers' individual capacity, insurers must pool their resources to handle a fraction of the multi-million dollar deal. In 2014, under a consortium, all of Ghana's general insurers jointly underwrote the insurance of the Floating Production and Storage (FPSO) Kwame Nkrumah, which has an insured value of nearly $900 million.

That said, over the past five years, the insurance market has grown at an average annual rate of about 30%. The affirmation of local content requirements in the 2013 Local Content protocols is being respected, and it is expected that the increase in capitalization requirements will force some insurers into mergers and acquisitions as the regulator seeks to ensure stability in the industry. The financial muscle of insurance companies is growing in its ability to underwrite large businesses.