Gulf Re may be a young company, but it expects its straightforward approach and healthy capitalisation to attract the kind of attention usually reserved for well-established players. Mairi Mallon spoke to its senior managers and backers to find out more.

Gail Norstrom prefers his brand of reinsurance to be more like watching paint dry on the wall rather than peppered with seismic events. It is this “steady as she goes” approach that he is applying to the 2008 start-up Gulf Re, which he hopes will pick up a sizable book of business in the January renewals.

“We are in the middle of preparing for 2009, which, quite frankly, looks very attractive to us,” he says.

Launched in March as a joint venture between Bermuda-based Arch Capital and the government-owned Gulf Investment Corporation (GIC) at the World Insurance Forum in Dubai, the company had $400m in capitalisation, became licensed in May and got its financial strength rating AM Best A minus in June of this year.

While this left it a little late to get a full book of business written in the July renewals, Norstrom expects November and December to be a busy time for him and his Dubai-based team, which will grow to 13 by the new year.

There has long been talk about further reinsurance capacity to serve the Gulf Cooperation Council (GCC) region. In the end, the concept was moved forward by GIC, a Kuwaiti-regulated investment venture owned by the GCC member states, which include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, and which owns half of Gulf Re.

One of the GCC group’s missions is to develop financial services in the region. The GIC investment in Gulf Re is part of this overall plan.

Hisham Al Razzuqi, chief executive of GIC said at the time of the launch: “The company will add depth to the GCC insurance sector and support the growth of GCC insurers – this is a strategic longterm investment for GIC, in line with my mission to develop financial services in the GCC.” He added that the company would get “no preferential treatment” from members of the GIC.

From the start, the target market has been the region’s global oil and gas, oil treatment, water treatment, aviation and shipping risks that traditionally go abroad to the US, Bermuda and Europe. That, plus (re)insuring some of the large infrastructure and massive building projects in the region.

“The idea for the company originated with GIC because they felt there needed to be an increase in reliable, local reinsurance capacity to serve the local market and to be involved in a number of large projects that exist in the GCC region,” Norstrom says.

Arch, like the rest of the global (re)insurance community had been keeping an interested eye on the region before deciding this was the perfect opportunity to take a 50% stake in Gulf Re. At Gulf Re’s launch, Mark Grandisson, chairman of Gulf Re chairman and CEO of Arch Re, said: “Gulf Re will match the experience from the West with the needs from the East.”

“Gulf Re will match the experience from the West with the needs from the East.

Norstrom says that Arch had some property facultative reinsurance business in the region through the London Market as well as some participation in projects. “But their feeling was that an investment in a company that had local eyes and ears would be more efficient than trying to do this from afar,” he added. “That said, Gulf Re is an independent company and Arch is an investor – although we do have a very good working relationship with them.”

Norstrom was recruited by Arch. Before joining Gulf Re, he was a broker with Aon and had known Constantine Iordanou, CEO of Arch Capital Group, for over 15 years.


He has been carefully growing the company from the ground up, finding staff to join him in his new offices in the low-tax Dubai International Financial Centre (DIFC) and building up relationships which are so important to doing business in the region.

“We have been gradually ramping up,” he says. “We got our licence at the end of May, then we got our AM Best A minus rating at the beginning of June and we wrote some business in the June/July period. What this break has done is given us the chance for us to help develop our systems, move into our new office, get our various bits and pieces of infrastructure in place – so it has been a very busy time for us, even without writing too much business.

“That said, we are off to a fine start. We have the beginnings of relationships established with the local brokers and insurers, and that of course is an on-going process."

When giving Gulf Re its A minus rating this summer, AM Best anticipated a “modest underwriting performance in the first two years” which would be supported by steady investment income.

It also said that the loss ratios for the classes of business to be written in the six GCC countries historically have been low, and could continue into the near future.

“This factor, combined with the substantial experience of the senior underwriters and management of Gulf Re, the technical support of ACGL through the provision of actuarial and other expertise, low start-up costs and the advantageous tax regime, is likely to result in good financial performance for the company,” said its report.

Norstrom will not reveal who the first clients are, but says: “I’ll characterise them as larger companies: energy risk, real estate developers - things of that nature. It is very much in line with the business plan that we filed with the Dubai Financial Services Authority (DFSA).”

“I have a feeling we are going to have a very, very busy November and at least early December.

He says that Sheikh Mohammed Bin Rashid Al Maktoum, Ruler of Dubai, is forward-thinking, and called the creation of the DIFC “a master-stroke” because it was attracting businesses from all over the world. He also likes the strict regulatory requirements put down by the DFSA, which, he says, foster transparency and creates a level playing field for everyone. “That is in my view, very good stuff.”

Treaty renewals in the region happen in July and January, and this January, Gulf Re expects to come into its own.

“We are starting to see January treaty business already,” says Norstrom. “The flow of facultative business occurs throughout the year, but it does dry up a bit in August and September, but it is fairly robust the rest of the year. Even in August we saw well over 100 submissions.”

He says that the market is very competitive, particularly for the local business. “But our hit ratio is well under 10% - we only wrote one risk for every 10 or 12 we got. Some of it is just our risk appetite – we have an appetite for higher quality risks. Amongst our requirements is to get an engineering survey with each and every fac submission and sometimes (the client) is just not capable of producing that type of thing.

“So we are taking a very technical approach to the business, how we view the adequacy pricing against our own technical rates. While we are following the market we will frankly only follow where we feel the terms and conditions give us the ability to make an underwriting profit.

“It is just starting, but given the amount of treaty activity that is already starting through the initial stages, I have a feeling we are going to have a very, very busy November and at least early December.”

At present, business is mainly coming from the GCC region, but they have seen business for informational purposes from the greater Middle East and North Africa (MENA) and Norstrom admits there is some attractive business in parts of North Africa that “at some time we will entertain – but not today,” he said.

Within the next few years Gulf Re is expected to look at the wider MENA region, and may even look at retakaful (the reinsurance for Sharia-compliant Takaful insurance companies and clients).

He adds: “There is another thing about Gulf Re worth mentioning, we are not going to do anything that we don’t understand and that we are not appropriately staffed for with the right kind of technical expertise.”

Mairi Mallon is a freelance journalist.