Shaun Brook Practice leader, insurance management Kane


With uncertainties continuing over offshore domiciles and the likely impact of Solvency II, Shaun Brook examines the potential of the Middle East as a growing and competitive captive hub.


insurance potential, it has all the ingredients to become the world’s next big captive hub.


T So much about the global economy is changing as we emerge from


the financial crisis. The axis of global economic power is most certainly moving eastwards. While recession and austerity measures remain a key feature of many Western economies, in growth markets such as the Middle East and the BRIC (Brazil, Russia, India and China) economies, economic development continues at breakneck speed as a result of their increasing wealth, growing middle classes, mega-cities, natural resources and massive infrastructure spends.


As companies size up what this means for their organisational structure, choice of domicile and risk transfer needs going forward, it is clear that captive insurance is attracting more and more attention. To date, much of the interest in the Middle East has been focused on opportunities in the market’s commercial insurance and reinsurance sectors. But there are compelling reasons to believe that the market is ideally placed to become a major captive insurance hub.


Part of the double-digit premium growth that the countries of the Gulf Cooperation Council (GCC) have witnessed over the past few years— even throughout the financial crisis—has been driven by growing risk awareness among individuals and businesses. This awareness has sparked a slow, but steady, growth in interest in self-insurance solutions from sectors as diverse as construction, energy, utilities, financial services, transportation, industrial firms, telecoms firms and healthcare.


he Middle East is commanding international attention as a result of a shifting macro economy and the rise of sovereign wealth. While much has been said about the region’s commercial


It has also prompted the region’s main financial centres—Bahrain,


Dubai and Qatar—to introduce bespoke captive legislation. While there was a great deal of hype following the introduction of this legislation, it will take time for the concept to bed down and for the Middle East captive market to properly develop. With Kane gaining its licence to be Qatar’s first captive manager in September, we are now active in all three centres and seeing an encouraging increase in risk retention enquiries.


The next 12 months will be a pivotal time for the growth of captives


in the region. Many of the potential captive owners that postponed decisions during the global downturn are now determined to see their self-insurance plans take root. In Qatar alone, up to 15 captives are anticipated over the next few years and, certainly, if premiums across the market begin to rise as the primary market develops and capital pressures grow, this will gain further traction.


In other markets, such as Saudi Arabia and Kuwait, the option to structure takaful captives—in line with Sharia principles—holds great promise. The Central Bank of Bahrain has emphasised takaful as an area of particular focus and we think it is significant that the third Saudi company to set up a captive—concrete firm Saudi Remix—chose Bahrain as a base for its insurer, Masheed Captive Insurance Company (see Table 1). While Saudi Arabia has not yet developed captive legislation, this may be available in the future and, in the meantime, buyers may decide to locate their captive in the same region, as Saudi Remix has done.


While there are a number of captives and protected cell companies seeding the pipeline, so far, just five captives have located in the Middle East. The first—Tabreed Captive Insurance Company—was set up in Bahrain. Dubai is home to two captives and Qatar currently boasts Al Koot, the captive insurer for energy giant Qatar Petroleum.


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