International panellists at the MultaQa Qatar conference in March were adamant that in the Middle East, everyone would get a slice of the action. Helen Yates reports
With its massive energy, construction and infrastructure projects in the pipeline, Qatar – the richest country in the world by GDP per capita – is bidding to attract the world’s financial institutions and insurance and reinsurance companies to set up shop in the region.
With the Qatari government investing an incredible $130bn into developing the economy, the project’s success is contingent on the country attracting the necessary global expertise. MultaQa Qatar (MultaQa meaning “rendezvous” in Arabic) was a crucial part of what has become a huge marketing effort – but from an insurance and reinsurance perspective, a hard sell was clearly unnecessary.
“There’s certainly enough premium to go around. The cake is very large and it’s getting bigger,” said Standard & Poor’s director David Anthony. He was speaking during the international panel discussion at the Doha-based conference, hosted by the Qatar Financial Centre Authority (QFCA) in association with Global Reinsurance. “It’s all credit to insurers and reinsurers in this region for keeping up with international standards (and in some cases exceeding them),” added Anthony.
Singapore-based Asia Capital Re, a new player in the Middle Eastern and Far Eastern markets with a $565m initial capitalisation, is aiming to be a major player in the region. Talking specifically about business potential in the Gulf Cooperation Council (GCC), the reinsurer’s CEO John Tan said there was plenty of opportunity for international insurers and reinsurers: “Retention is quite low at the moment but the market is young and local capacity is limited.”
Tan added that it was imperative for new entrants to open a local branch. “It’s very important to have a presence here,” he said. “It’s difficult to understand the market from Singapore.”
With the increasing pressure for reinsurers to diversify, those global players with a bias towards catastrophe risk could increasingly look to markets like the Middle East in order to rebalance their portfolios, said Bruce Garrett, managing director, marine & energy at Marsh. But this could instil downward pressure on already softening rates. “The benign climatic conditions mean everybody wants a slice of the action, which means prices are very competitive,” he said.
Marsh took advantage of the broad spectrum of international delegates at the conference to confirm it had applied for a license to operate from the QFCA. Commenting on the application, Robert Makhoul, head of Marsh’s Middle East operations, said: “Our plans to set up an office in the Qatar Financial Centre reflect the exciting opportunities available there. We... believe that there will be strong demand for the kind of broking and risk advisory services we can offer companies in Qatar.”
“Takaful” was the word on many delegates’ lips. The potential of Shari’ah compliant insurance products in a region where life insurance penetration has been very low (because it is considered to be a form of gambling and is therefore anti-Islam) had many people excited. “Where there are large local Muslim markets they will probably prefer to take Shari’ah compliant products over traditional insurance products,” predicted Anthony. He pointed to prospects in the Saudi market, but said that in the Dubai market, with its high proportion of expatriates, takaful had less potential.
While the view from all panellists was overwhelmingly upbeat, there were some areas of perceived weakness in the region. Despite Qatar’s recently upgraded “AA-” sovereign financial strength rating and political stability, its position in the Middle East could pose a risk. “It’s easy to forget that this region can be viewed with envy,” reminded Anthony.
The regional concentration of risks was another concern. Although natural catastrophes are not a regular feature of the GCC region, Anthony warned that a large global catastrophe could hit the market and affect the financial strength of regional players. Tan agreed. “Unless the market gets a lot more efficient and you get a lot more differentiation, you can stand alone in some ways but also have exposure to large global events. A lot of risks are getting more systemic.”