HOLLARD MOZAMBIQUE: Energy Experts to Protect Mozambique’s Dynamic Industry

For many, Mozambique is the new frontier in oil and gas exploration, with both onshore and offshore activity attractive for multinationals searching for new regions to source hydrocarbons as the world transitions to renewable energies. At the same time, the country boasts abundant solar and wind power opportunities with the government hoping to attract FDI and create a sustainable, long-term economy.

Of course, there have been hurdles. Terrorism, global economic slowdowns, shifting demands due to the Russian invasion in Ukraine, pricing challenges, and local skills and infrastructure have all hampered Mozambique’s energy pathway.

But in 2017, CNN highlighted Mozambique as an energy giant following the discovery of major gas deposits off its cost. Estimated at around 20 billion barrels of natural gas, there was new hope of job creation and sector development. This positivity followed on from the significant discovery of 2012 when 85 trillion cubic feet of natural gas was discovered in the Rovuma Basin in Mozambique’s north.

In January, a modern floating plant for liquefying natural gas, built in South Korea, arrived in Mozambican waters, expected to produce millions of tons of natural gas rom the regions producing wells.

The challenge for the country now is one of image, following the declaration of force majeure by TotalEnergies as terrorist groups attacked LNG projects in the Cabo Delgado province. Billions of dollars was at stake as the country tried to ensure international organisations that this temporary issue was contained and under control. Five years later and the government is now confident that the region is stable, encouraging energy giants to restart projects as soon as possible.

PROTECTIVE POLICIES 

The need for protection in Mozambique became blatantly clear. People, assets, data, and territory must be safeguarded, both through traditional means on the ground, and from a risk perspective through world-class insurance products from reputable organisations.

Enter Hollard Mozambique, the local arm of the Johannesburg-headquartered Hollard Group – one of the continent’s leading, privately-owned insurance groups, with turnover exceeding ZAR15 billion.

The company is a leading brand around sub-Saharan Africa, providing innovative short- and long-term insurance products across a range of different sectors. In Mozambique, the company is well-established as an industry leader and works in the energy industry to protect where it is needed most.

Bukhosi Sibanda, Commercial and Technical Director at Hollard Mozambique tells Energy Focus more about the company’s offerings in the energy space.

“We have policies that are specific to oil and gas, and then we have commercial policies,” he begins.

“First, we have Operators Extra Expense (OEE), which includes control of wells programme and operational assets risk cover. This is basically a specialised policy that is available for the oil and gas operators that allows them to cover the cost for regaining control of a wild well. If something is not working, perhaps due to fire or similar, this is the kind of cover that we provide.

“Secondly, we have Construction All Risk Cover, which covers the works that are related to the oil and gas operators both on the construction side and also on the erection side.

“Next, we have Terrorism Cover which protects against terrorist and sabotage activity.

“Then, we offer a Marine Cargo product, and we also have primary and excess liability policies which are linked. Linked again is our aviation cover, either owned or non-owned covering the hull and liability,” he highlights.

The development of the industry in Cabo Delgado – an area traditionally underserviced by infrastructure and recently in receipt of foreign investment into road networks to assist in humanitarian programmes for escaping terrorism and fleeing natural disaster – has fuelled growth of air travel for professionals to move in and out quickly during planning and development phases.

“This means there are airports that have been built so we have developed an Airport Owners and Operators Liability Cover. We also have Charterers Liability Programmes and these are all the main policies that are directly linked with the oil and gas sector,” says Sibanda.

INDUSTRY DEVELOPMENT

For Mozambique, development of this sector is vital. By March 22, the government had received 13 bids for prospection and exploration through its sixth licensing round. The bidders list reads like a who’s who in major oil and gas with ExxonMobil, TotalEnergies, Eni, Sinopec, Qatar petroleum, Sasol and more. Clearly, the desire from business is there. And the investment that comes with successful bids will be transformative in a country which still features at the bottom of lists around GDP per capita, human development, inequality and average life expectancy.

Equally, the development of an insurance industry is vital in any nation searching for meaningful and stable economic progress. Hollard has been part of the industry building process in Mozambique, bringing standards and ideas that were previously not realised in a country where insurance was controlled by the state. Today, there is a competitive local market with organisations all vying for work in the oil and gas sector.

Hollard has successfully separated itself from the rest through product and service excellence, but also through scale following its acquisition of ICE Seguros earlier this year.

“This transaction represents a huge vote of confidence in the Mozambican insurance market. Approval of the deal is also a vote of confidence in Hollard Seguros and our purpose of enabling people and businesses in Mozambique to secure a better future by optimising opportunities for creating value and wealth,” said CEO Henri Mittermayer at the time.

“With our Life business showing strong growth, and with our group turnover across both Life and Non-Life businesses now close to Mzn 6.5bn, we are building a business of real stature and look forward to contributing to the vibrant Mozambican insurance market in our new capacity,” he added.

For Sibanda, new international networks within ICE have been invaluable. “ICE was our biggest competitor when it comes to the oil and gas sector. Following our acquisition of ICE, we now have all of those resources and capabilities, and the networks, within Hollard,” he says, adding that the company is part of a small group that now controls almost 100% of the oil and gas insurance business in the country.

The acquisition of ICE is expected to allow Hollard with access to international markets as the company looks to expand on its local learnings. “Obviously, when it comes to acquisitions, sometimes you don’t go out looking for it. If opportunities present themselves then we will be happy to look at them,” confirms Sibanda on an ongoing growth strategy. “Looking at what we have done with ICE, we have really enhanced our presence in Mozambique in terms of size, global business development capabilities, and online systems.

“Looking at the networks and partnership arrangements that ICE had with the global players, combining these two makes for quite a sizeable and solid operation. We now have significant opportunities and capabilities to grow from where we currently are to where our strategy is taking us. We are happy with the kind of future we are seeing for the operation.”

LOCAL OPERATOR

The scope of project work set to come on stream in Mozambique is large, and Hollard is proven and ready.

“In most cases, the law requires insurances to be taken out with local operators. We have a sister company in Ghana which is able to offer oil and gas solutions, but those are specific to Ghana, our license allows us to operate in Mozambique and so we have been offering these services to clients that are specifically active with operations within Mozambique,” explains Sibanda.

“There have been a number of projects coming on stream in solar,” he adds. “We have seen the one for Scatec, and then last year the one for Globeleq was the second to come into operation. That was quite sizeable for Mozambique, possibly the largest in Mozambique for some time. We are also seeing a number of projects proposed for the coming year. Overall, because of the climatic conditions in Mozambique, there is a lot of activity when it comes to solar.”

However, natural gas remains undoubtedly the focus, and it remains classified as a green energy source in the EU, helping to shift strategic reliance away from coal. While complicated, insurance in this space is lucrative, with so many moving parts and infrastructure of such value all requiring specialist knowledge.

“Mozambique will be home to the biggest investments seen in Africa in that space,” claims Sibanda.

“When you look at the size of the subcontractors that are going in there, and the developments around the oil and gas sector in terms of infrastructure, towns and cities that are being built, and support services – there is a lot of investment. This will fuel growth and development in the economy of Mozambique.”

From a risk management perspective, Hollard Mozambique has not focussed solely on upstream, instead opting for secondary tier where the many international contractors remain active. Instead, upstream players have been supported by international insurers. “We are a part of that group and we take advantage of risk management capability from our head office in South Africa. That has been useful with the handling of risk management surveys,” says Sibanda. “We also partner with other third-party service providers to ensure they can provide different risk management services. In some cases, reinsurers also assist in terms of that provision.”

BIGGEST INVESTMENTS

The company’s portfolio demonstrates its ability to operate alongside the biggest and the best, supporting local interest while providing comprehensive protection.

“What we have seen is the area being led by Total – that is where most of the growth is going to come from. If you look at the magnitude of investment put in there, Total is basically the biggest investor,” Sibanda says of exciting projects in the north. “We have other projects including Eni which is offshore, and Sasol in Temane – a project which has advanced a lot with a lot going on now in operational phases.”

Avoiding fallout from the shutdown of Total’s Afungi site in April 2021 was a challenge, and the wider industry has suffered. But the expectation is for operations to resume within six months.

“The main challenge with Total having stopped operations is the limitation of insurance premiums to other oil and gas partners, meaning the insurance industry misses a huge opportunity,” Sibanda details. “We are hopeful that by the next financial year we will see the size of the insurance industry premium doubling because of oil and gas.”

Previously, expectations were that Mozambique would become a major exporter by 2023 but that progress has been delayed. Nevertheless, most remain enthusiastic about the country’s prospects during challenging times for the global energy transition. For Sibanda and the insurance space, there is underlying confidence in the country’s resources and those that manage them.

“Generally speaking, when we look at where the insurance industry is right now, we are quite upbeat and positive,” he says. “The biggest challenge that we have is enabling legislation in Mozambique, mostly looking at the non-recognition of reinsurance as an admitted asset. When we reinsure into international markets, our law does not recognise that we have shared part of the risk into the market and we are still required by law to provide capital for all those liabilities. That limits the growth of the insurance industry in Mozambique. There is a review underway, and we hope that policy makers will see a reason to amend the law, especially when you look at the developments that are coming from oil and gas.”

Hollard’s position in the market remains powerful and, following its acquisition of ICE, the organisation is now a set to expand its energy offering, becoming recognised globally as reliable African partner. As Mozambique’s industry opens up, Hollard stands as a leader with so much opportunity at its fingertips – and without any challenge around image.