Conferences in Qatar and Dubai highlight growing reinsurance opportunities

MultaQa Qatar, an insurance conference in Doha, Qatar, kicked off a week of conferencing in the Gulf region.

It is followed by the World Insurance Forum. The fact this conference is in Dubai, having historically been held in Bermuda, is seen as significant.

“One reflects on whether that reflects a meaningful development or a marketing mirage”, said Clive Thursby, manager of emerging and alternative markets at AM Best.

Both conferences have attracted delegates from the world’s top insurance and reinsurance companies, as well as the major brokers and service providers. They have come to find out more about the region’s insurance potential.

MultaQa Qatar, which took place on 15-17 March, was sponsored by the Qatar Financial Centre in association with Global Reinsurance.

Lloyd’s chairman Lord Levene and Qatar’s minister of finance Yousef Kamal drew attention to the country’s incredible economic growth.

Built on oil and gas wealth, the Qatari economy has been growing at a rate of 20% per annum over the last five years. However, insurance penetration is still very low.

“The $6.2bn of business generated in 2006 is only 0.17% of the global insurance industry,” said Kamal. Economic growth would change that, he added.

“You only have to travel around the Gulf to see the evidence that billions of dollars are being invested in local projects,” said Kamal.

“More than $1.1trn is being invested in high value projects, with Qatar alone investing $145bn.”

“The real question is, how do we turn this enormous economic activity in the region into insurance booked premium?

Dermot Dick

Dermot Dick, international underwriting executive vice president at Qatar Insurance Company, said: “The real question is, how do we turn this enormous economic activity in the region into insurance booked premium?”

In its second year, the conference in Doha drew an even bigger crowd, suggesting interest in the region continues to gain momentum.

Levene joked that he had hardly recognised the Doha skyline with its soaring skyscrapers under construction. It had been just 12 months since his last visit. “I wondered if I was on the right plane,” he said.

With its vast oil and natural gas reserves, Qatar is planning some of the largest energy projects in the world. It is the world’s largest exporter of liquefied natural gas (LNG).

The Qatari government is developing the country’s infrastructure in order to support this. This includes an entire financial centre consisting of several skyscrapers, a new airport and self-contained energy and education cities.

While a number of local insurers already exist, the message at the conference was that the expertise of specialist international insurers and reinsurers is also essential in order to support the massive growth taking place.

“The market will continue to undergo rapid expansion,” said Levene. “A high level of professional and strong management will be critical.”

However, Levene sounded a note of caution. He reminded delegates that the industry was currently facing tough market conditions. “The insurance market has no choice but to price risks carefully”, he said.

Levene added that there were rate reductions on every line of business. Insurance and reinsurance companies are often tempted to lower their rates in order to gain market share when entering new sectors. The Lloyd’s chairman has cautioned companies to maintain discipline.

According to Graham Morral, regional head of distribution at Zurich International Life, insurers entering the region are hoping to contribute to its growth. “We’re not just coming to take some of the market, we’re coming in to grow the market,” he said.

“The insurance market has no choice but to price risks carefully

Lord Levene

The QFC has issued licenses to AIG, Aon, Axa, Zurich International Life and Marsh among other players.

Hub and spoke

Despite clear parallels between the financial centres of Bahrain and Dubai, Qatar Financial Centre representatives are adamant they are not in competition.

“Qatar is not copying anywhere, it’s building a state in its own right – it’s not a copycat state,” said Stuart Pearce, CEO and director general of the Qatar Financial Centre Authority.

However, Thursby questioned whether all three centres would survive. “It’s hard to believe they can all be winners,” he said.

The financial centres are growing in importance as re/insurers recognise that old distribution channels are no longer relevant. Speakers considered that a presence in the region was necessary in order to do business.

Demand for professional indemnity cover (including directors & officers and errors & omissions), terrorism and political risk cover, alternative risk transfer solutions (including captive insurance), marine, energy, catastrophe and Shari’ah-compliant products (Takaful insurance) are just some of the lines of business expected to grow as the economies of the Gulf develop.

Compulsory insurance, a growing expatriate community and an increased acceptance of insurance by the local population are expected to have an impact on personal lines penetration.

Levene predicted that companies in the region will also face increasing risk management requirements. “Insurers have the experience and risk appetite to take on increased exposures, but they want to work with companies that adopt a strong risk management culture”, he said.

There are still plenty of challenges. Speakers drew attention to the lack of local talent – though a number of training programmes are underway, the current shortage of skilled human resources is considered a concern.

Other challenges include the rising price of oil, inconsistent standards of regulation across the region, the impact of emerging risks such as climate change (as highlighted by Levene), and the fact local players have progress to make on capital management and ERM.