insurance in iraq

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Senior Insurance Officer

Sergey Lapko

UAE, DubaiNovember 7, 2012

Insurance in Iraq

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Iraq

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The Republic of Iraq

Population 31 million people

GDP USD 145 billion, 10% growth in 2011

Oil reserves: 10% of global reserves(143 billion bbl, world's #5)

Share in production: 3,75% of global production (3,1 million bbl/day in 2011, world's #7)

Target production: 8,5 million by 2017

Planned investment in Energy Sector: 500 billion USD by 2030

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Insurance Regulatory Environment

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Insurance regulations

In place:1. Civil Code2. Insurance Business Law #10-2005.3. Licensing Procedures4. Capital requirements5. Calculation of Reserves6. Solvency Margin Calculation7. Law on Mandatory Motor Insurance

Regulations yet to issued:1. Procedure regulating insurer's reporting to Diwan.

Regulations cancelled:1. Mandatory 25% cession to Iraq Re.

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Regulatory Environment

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Insurance regulations

Key facts:1. Insurers, Brokers and Loss adjusters must have a license.

2. License annually renewed.

3. Minimum capital for insurers: 5 billion IQD (4 million USD).

4. No mandatory cession to state reinsurer Iraq Re.

5. Mandatory types of insurance: Motor Liability.

6. Mandatory Construction insurance: contradicting sources.

7. Head of Diwan has the authority to "issue statutes obliging the persons to ensure against the specified risks" Law 10-2005, Article 103.

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Insurance Market

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Regulator:Iraqi Insurance Diwan

The Market:2 state direct insurers and 1 state reinsurer.Approx. 30 licensed insurers.

5 insurance traded on Iraqi Stock Exchange. (Market cap. 1,5-5 million USD)

Issues:1. Undercapitalized insurers.2. Communication and interaction.3. Limited number of qualified personnel.4. Gaps in regulations.5. Lack of information about the market.6. Licensing requirements towards the loss adjusters.

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The Operators

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LUKOIL TODAY

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1% of global oil reserves

2.2% of global oil production

0.4% of global gas reserves

0.6% of global gas productionLUKOIL operates in 37 countries of the world.

Exploration 11 countries

Proven oil reserves 6 countries

Proven gas reserves 4 countries

Oil production 6 countries

Gas production 4 countries

Oil Processing 6 countries

Petrochemical 3 countries

Fueling Stations 27 countries

LUKOIL among the global private companies:Number 1 in the amount of proven oil reservesNumber 3 in the amount of proven HC reservesNumber 3 in oil production

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EXPLORATION AND PRODUCTION

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LUKOIL In Iraq

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LUKOIL In Iraq

Mega-Project West Qurna-2One of the largest fields in the worldRecoverable reserves - about 14 billion barrels Start of production - 2013Target production level - 1.800 thousand barrels per day - 2017

Exploration Block 10 - 4th bidding round in 2012with Inpex (Japan)

120 km west of Basra

Country Year Number of wells Oil production

Russia 2010 ~24,000 90 million tons p.a.

Iraq 2017 ~600 96 million tons p.a.

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West Qurna-2

DPSC development and production service agreement

Signed: December 2009Period: 20 yearsPeak production 1.8 M bopdRemuneration fee: $1.15 per barrel Stakeholders:

75%

0.25

Project Share

100%

Financing Split

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Extent and Capex of the Project

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3% 1% 1%

15%

55%

6%

19%

TOTAL CAPEX 2010-2013 ($5,6 bln)

Prospect Drilling 3D SeismicResearch and other Well drillingFacilities construction Supplementary costsOther

Total investment until 2030:

30+ billion dollars

West Qurna-2 is the largest project in LUKOIL Overseas history

Early Oil 150 - 400K bbl/day (2013) Full Development 1 800K bbl/day

(2017)

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Insurance for the WQ-2

Major types of insurance purchased:

CAR/EAR OEE Property Damage TPL

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What kind of risk one should expect in Iraq? The LUKOIL case

- Investment program 5+ billion USD (Early Oil)- Standards Best international practice

QA/QCComprehensive Risk Management System

- Contractors

- Logistics Support from SOCCustoms Control zone in WQ-2 areaLevy exemptionThe "Iraqi factor"? Emergency clearance

- Emergency LUKOIL fire brigades and equipment2 well control companies contractedNo customs procedures in case of

emergency15

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What kind of risk one should expect in Iraq? The LUKOIL case

- Safety Terrorism threat:Physical protection, Oil Police, Stationary Safety Posts, Olive Group Situational Centre in Basra.

- Personnel International and local.Training Centre in Basra: 1300 trainees

- Local Population CSR ProgramsJobsSupport of Local Economy

- TPL exposure Remote location, No surrounding industry.Non-litigious society

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IS NOW THE RIGHT TIME?

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THANK YOU FOR YOUR ATTENTION