HELEN YATES: Thank you all for being here today in the Lloyd’s Special Dining Room to discuss the Middle East re/insurance market. I’d like to start by asking you whether you feel the opportunities in the Middle East are real or imagined, particularly in light of the global financial crisis.
STEPHEN MAY: My view is based simply on the economic environment— the things that were attractive about the Middle East back then, and continue to be now. At the simplest level, these are the fact that the main resource is oil and that it continues to trade well above the forecast numbers that were made two or three years ago. In addition to that, most people felt insurance expenditure was going to increase on an increasing asset base. So those two things made it look very attractive, and everything you read suggests those things have continued to prevail.
TREVOR OATES: If you were to compare what’s been happening in the Middle East with what’s been happening in Asia, the Arab financial culture is possibly in a position to learn from some of the mistakes that have been made in the investment strategy in Asia, so that the way they’ve been investing their money is in a way that’s attempting to create longevity with the economies they’re building. The opportunities are very real because the Gulf region is now linked to the financial centres in London, the US and Singapore in a way that it wasn’t 10 years ago.
AHMED RAJAB: Insurance continues to grow in the Middle East; it grew by about 18 percent in 2009 and is expected to grow by about 12 percent in 2010—this is two, three or even four times GDP growth. So clearly, both people and markets are becoming more aware of the need for insurance in the Middle East.
TIM GRIFFIN: There are the high-profile difficulties in Dubai, which are probably more localised than representative of the whole area. From our perspective, we’ve been looking at the opportunities in construction, and I think there has been some slowing, but overall, the indications are that the very big infrastructure projects in many of the areas—Saudi, Qatar, Abu Dhabi and further afield in places such as Libya—are going to be ploughing ahead, and the resources are there to do that.
CHRISTOPHER PLEASANT: I see Dubai in a slightly different position to the rest of the Gulf region. Obviously, it didn’t have very much in terms
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of energy resource in the first place, and it diversified very rapidly through leverage and was hit harder by the setback that came from the banking sector. But there are still phenomenal prospects for the whole region, both in terms of countries that have got energy supplies and their neighbours. The growth prospects are fantastic and penetration is so low, we’re going to see significant growth over the next five to 10 years.
NICK CHARTERIS-BLACK: Generally, there remains a positive outlook for the region, but we need to put it into some sort of context. The market will have to grow substantially to be of any size in global terms. The Gulf market is around $10 billion—around $19 billion if you include Turkey— which means it’s about the same size as the Belgium market or the Portuguese market, and with respect, we’re not getting that excited about Portugal, are we? The other thing for me is that big insurance markets are generally based on people and large populations; the problem in the Gulf, with the exception of Saudi, is that the populations are very low. It’s important for the Middle East/Gulf market to access the large Asian economies to get the demographics right.
MATTHEW CHANDLER: The slowdown has certainly taken the edge off the strong economic growth, but it’s not gone away—it’s a timing issue. A lot of the growth is pegged to oil, and the oil price has recovered. Dubai is a particular issue that’s playing through at the moment, and that’s a drag on the UAE. From a Lloyd’s perspective, at a macro level, we get about $300 million as a market out of the four countries—Saudi, Qatar, Bahrain, the UAE—and looking at 2010, it looks like it’s going to be around the same kind of levels. So there has not been an immediate tailing off of use of Lloyd’s as a reinsurance market for the region, although a number of the bigger projects will have slowed down.
HELEN YATES: Can we talk a bit about the fact that many of the governments in the region are pledging billions of dollars to developing their economies over the next few years? What does this mean in terms of opportunities for insurers and reinsurers?
CHRISTOPHER PLEASANT: They know they have to differentiate themselves and to diversify away from the energy sector. There’s a lot of construction going on, whether that’s infrastructure projects or diversifying into tourism. That will start with the import of goods—because nearly
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