Accolades like ‘world’s fastest-growing economy’ and ‘richest population’ are all well and good. But David Banks reports that Qatar has now unveiled a list of reasons why its reinsurance credentials must be noticed too.
The Arabian Gulf has produced mixed messages for international insurers of late. Whether it is concerns over low premiums, low volumes or low risk retention – or even those economic jitters in Dubai – the allure of the region’s gleaming skyscrapers has taken a few hits.
Yet in the last 12 months, Qatar has placed itself safely on a separate track when it comes to international awareness of its economic growth. It has also made a special play as a hub for international insurance and reinsurance.
Many of the reasons for wishing to do business in Qatar were highlighted at March’s MultaQa conference in Doha, held by the Qatar Financial Centre (QFC) in association with Global Reinsurance. Qatar is a gateway to emerging markets, a source of investment capital, and a platform for large domestic and regional insurance deals in energy and infrastructure.
To top it off, the online trading platform Qatarlyst brings international underwriters and brokers together with Qatar’s domestic market at the touch of a button. All of this, underpinned of course by appealing economic projections in Qatar’s oil and gas economy, has allowed the country to tell a story of differentiation.
Threats and opportunities
The positive messages spoken by the QFC, however, are arguably essential in overcoming the hurdles presented by a difficult Gulf market.
Conference delegates heard that pricing throughout the Gulf Cooperation Council (Saudi Arabia, Qatar, Bahrain, Oman, the UAE and Kuwait) remains very low and that the volume of premium emerging from the region is just over $22bn – equivalent to the insurance spend of a country like Belgium. But while the figure is small, supporters argue that this reflects the market’s enormous potential.
Reinsurers operating in the region are also positive and say that, despite low pricing, the Gulf can still be lucrative territory because of a high level of risk transfer. While risk management is embryonic, balance sheets are relatively healthy because claims figures and catastrophe exposures remain low.
There are clearly plusses and minuses, and the QFC says there is much still to be achieved. The centre has attempted to be realistic in its plans for financial services growth, rather than succumbing to unbridled ambition and optimism, says acting chief executive Shashank Srivastava. Srivastava – who refined the QFC’s focus as reinsurance, captives and asset management – hailed the presence of 120 registered companies in March as “critical mass”.
In his opening address to the MultaQa conference, Srivastava said Qatar’s profile as a reinsurance hub had actually been enhanced by the financial crisis, as the strength of Qatar’s economy, coupled with the relative resilience of Asian markets, had prompted more insurers and reinsurers to look at Qatar.
The next objective for the QFC will be to develop local underwriting and actuarial talent so that Gulf insurers may transform themselves from virtual fund managers to actual underwriters.
A question mark remains over whether the region’s investors are warm to insurance. However, Seib Re – a joint venture between Qatari royal sheikh Jabor Bin Yosef Bin Jassim Al Thani and Chedid Capital Holding – proved not only that there was wealth available but that business leaders were prepared to prevent the outflow of premium and leverage their network for insurance gain.
QFC is also noticing a growing relationship between private equity and reinsurance companies. Qatar’s standing as an investment hub for insurance could grow even further when the European Alternative Investment Fund Managers Directive is decided in June. In light of the directive, QFC hopes to attract investment funds and is racing to make sure international companies are aware of its supervisory regime in the face of competition from Bermuda and Switzerland.
Q Re, another Qatar-based reinsurer licensed in 2009, is an example of a homegrown company with international ambitions. The company was spun off from QIC International and has an Afro-Asian reinsurance footprint to avoid the catastrophe risks that western markets present.
Meanwhile, the first transaction on the new trading platform Qatarlyst took place last year between Bahrain National Insurance and London broker RFIB. QIC’s chief executive, Ian Sangster, says that although the concept will ultimately add to bottom-line expenditure, its efficiency will release underwriters to go out and write more business, and encourage “world-class” business models.
The big picture
It is no wonder Qatar has been a paragon of consistency in troubled economic waters. An annual income of $94bn divided between less than 1.5 million people does a lot to keep the economic wheels turning. Wealth tends to smooth out such doubts. Oil and gas accounts for half of the country’s GDP, 85% of exports and 70% of government revenue.
The QFC hails Qatar as having huge potential for (re)insurance, but a thriving domestic market, a developed electronic trading platform and 120 registered companies beg the question: is Qatar still emerging or has it already emerged? GR
For full coverage of the MultaQa conference, visit: tinyurl.com/multaqa