Power Distribution Services (PDS) An insurance expert has said the guarantees presented by Power Distribution Service (PDS) for the power concession agreement but discredited by the government as fraudulent are in fact “solid as gold.”
Larry Kwesi Jiagge says the companies that fronted for PDS – the Qatari insurance company, Al Koot and Joe Australia – are both A-rated reinsurers who have operated in Ghana for a long time.
“Because they are not frontline insurance companies, the general public does not know anything about them. Only those in the insurance industry know about them,” he told Samsom Lardy, host of Joy News’ Newsfile show, Saturday.
The government suspended the concession agreement last week after alleging fraud in the guarantee presented by insurance firm Al Koot to support the takeover of the Electricity Company of Ghana (ECG) by PDS.
Although the entity that supervised the agreement, the Millennium Development Authority (MiDA) maintains it followed due diligence throughout the process, local insurers, Donewell Insurance says Al Koot was not truthful in its communication to ECG.
He said people are losing sight of the fact that it was CAL Bank, acting as a principal insurer, which approached Donewell Insurance to issue a counter-guarantee to them.
Mr Jiagge said CAL Bank in a bid to limit its investment took a counter-guarantee from Donewell.
“Guarantees are not insurance so if the guarantor pays the guarantor, he can proceed against the guaranteed for reimbursement. Insurance is a promise that if anything should happen I will pay and that ends it and you don’t have to go back to anybody.
“But with bonds, guarantees or surety contracts generally you are only guaranteeing performance. At the end of the day, if the guarantor pays he can fall back on the guaranteed,” the insurance expert explained.
According to him, using the ‘cut through clause’ which provides for the principal to contact the reinsurer in the event of a claim it cuts all the bureaucracy in claims payment.
“Donewell noting it has limitations so they also sought re-insurance. The re-insurance company may not be prepared to carry all the risk so they go to another set of insurers, retrocessions, who will also take a piece of the business,” he said.Late Tuesday, July 30, the government announced the suspension of the PDS — barely six months after the company took over power distribution from the ECG.In a statement signed by Information Minister, Kojo Oppong Nkrumah explained that “the decision follows […]
