With Japan reeling from natural disasters and political upheaval spreading throughout the Middle East, MultaQa 2011 looked beyond Qatar and the GCC region

MultaQa Qatar undoubtedly has a strong GCC flavour pervading the prepared speeches and informal discussions. But it is very much an international conference, and delegates’ thoughts and comments wander frequently to issues outside the region.

This was true at the 2011 event, not least because a magnitude 9 earthquake and ensuing tsunami had struck Japan just three days before it opened its doors on 14 March. At the conference, as in the wider market, there was much speculation about what insured losses would be and how the event would affect reinsurance prices, terms and conditions.

A time for discipline

In his speech on the first day, Lloyd’s deputy chairman Graham White set the global agenda, urging the market to focus on underwriting discipline despite the Japanese tragedy. “There is no moral or financial value in waiting for a market-turning event – we must always look to be better,” he said. “This is a moment of opportunity to get back to basics. If rates are low and investment income is hard to come by, then a clear spotlight focuses on underwriting.”

White pointed out that the property/casualty (re)insurance market had made an underwriting profit just five times since 1975, adding: “An entire generation of underwriters has grown up working in an environment where it is not necessary to derive a profit from underwriting. Well – it is now.”

Although underwriting discipline is arguably the underwriters’ domain, White also noted that brokers have a role to play in maintaining sound practices. He urged brokers to act responsibly by looking for stability when placing business rather than just the lowest price.

“In the insurance market, as in the supermarket, you get what you pay for,” he said. “Mutton never tastes quite as good as lamb. Insurance buyers want security. At Lloyd’s, we make it our aim to deliver that.”

In the first panel of the day, PartnerRe’s head of southern Europe, MENA, Africa and Latin America, Salvatore Orlando, echoed White’s calls for discipline. “It is essential to apply cycle management to be a successful company,” he said.

He also contended that the industry should not expect constant growth. “Everyone wants to do business. We are business people. But in reinsurance it is not necessary each and every year to, say, increase your portfolio by 10%,” he said.

Others suggested that the global (re)insurance industry was not totally lacking in growth prospects. While growth was stagnant in mature markets, Orlando pointed to emerging market powerhouses such as Brazil, Russia, India and China that would offer opportunities.

While agreeing that the sector does not need constant growth, Echo Re chief executive Juergen Gerhardt expected to see medium to long-term prospects. “As exposures are expected to grow more rapidly than the overall GDP – because of technical progress, an increase in international value, and also because of concentration of values in areas prone to natural catastrophes – this should also help reinsurers to grow faster than GDP,” he said.

Others argued that reinsurers can also create their own openings through innovation. Berkshire Hathaway Reinsurance international division managing director Manfred Seitz said the reinsurance industry had been lacking innovation in recent years. He said primary firms were driving the push into emerging markets and the development of new products for mature markets. “The reinsurance industry can play a supporting role and hope to help promote this.”

He added: “In recent times we haven’t done much, We have looked more at how we can move away from risk.”

Seitz contended that the Japan catastrophe could provide an ideal opening for reinsurers to get back into the innovation game. He recalled that the attacks on 11 September 2001 spurred the sector into action because of the unexpected accumulation of losses from different business lines in a single event.

“It will happen again now in Japan where we have the combination of earthquake and tsunami. That is an area where the reinsurance industry could and should innovate,” he said.

He referred to Munich Re’s proposed industry-wide initiative to offer greater liability limits to offshore oil rigs as a recent example of change. “There is plenty of potential, which I hope will prompt a return to innovative behaviour,” he said.

Global influences

Throughout the conference there were also reminders that, while the GCC is often considered insulated from events in the rest of the world, it is nonetheless influenced because of heavy foreign interest and participation.

While there is no equivalent of Europe’s Solvency II capital adequacy regime planned for the GCC, it could still feel effects because of the interconnected nature of the international (re)insurance markets.

“Standards that are developed globally set the benchmark for the companies in the GCC region to live up to and build resilient operations that can in future attract business to the GCC markets,” said Munich Re client management executive for the Middle East and North Africa, Andreas Pollmann.

The conference also highlighted the influence the region can wield on the international (re)insurance markets. A further distraction was the civil unrest in some GCC member states and the wider Middle East and North Africa region. Some delegates could not attend because of clashes between anti-government protesters and riot police in the Bahraini capital of Manama the previous day.

Some speakers noted that the unrest in the region was sparking interest in obtaining terrorism and political violence cover from the global market.

(Re)insurance broker RFIB Middle East director Mark Randall said most local writers exclude terrorism and political violence from their coverages, although a dedicated terrorism writer has been established in the Dubai International Financial Centre. GR