In a Court filing, a senior official of the Esso Exploration company recently revealed that the oil company used an insurance broker in the UK to provide the US$600M insurance policy for the Stabroek Block.

The transaction is being flagged by the Insurance Association of Guyana for possible breaches of the Local Content Act of 2021.

In a Court document, the official explained that the insurance policy provided by Esso was actually prepared by an international insurance broker based in the United Kingdom.

“As is common practice for insuring risks of this nature, ExxonMobil Risk Management, on behalf of Esso, utilized the services of Aon UK, in its professional role of international insurance broker, to arrange coverage for the risks described with suitable insurers for the insureds named in the 2022/2023 Policy,” the company’s corporate secretary explained.

But in a letter to the press, the Insurance Association of Guyana said under the country’s Local Content Legislation, the local insurance industry ought to facilitate 100 percent of all the oil and gas insurance policies. It said when coupled with the 2016 Insurance Act, it would appear that Exxon’s affiliate breached the country’s laws.

“The 2016 Insurance Act also protects the interests of this nation and the insurance industry by strictly prohibiting the direct placement of insurances to foreign non-admitted carriers unless by engagement through a local ‘fronting’ Insurer or through a Local Insurance broker in possession of a Special Brokers License. Therefore, the appearance of a cover note issued by a U.K. broker, evidently unlicensed to operate in Guyana, during the judicial process of the case to which the writer refers, brings sharply into focus, what appears to be a circumvention of our laws,” the association said.

The Association said the Local Content Act provides a mechanism for the Oil and Gas insurance premiums, that are deductible as Cost Oil, would be remitted to the benefit of the local economy.

The indigenous industry, it said, stands to earn from Oil and Gas insurance premiums, reinsurance commissions and fees, and brokerage commissions. Added to that, it said the local industry stands capable and ready to advise the Government on insurance and risk management matters regarding Oil and Gas Industry. However, the Insurance Association said the industry continues to be bypassed.

“Unfortunately, the local insurance industry has, so far, mostly been bypassed in providing the services that it is fully capable and prepared to do…The local industry has much to bring to the table,” the release said.

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