London. This is what we do, and to try and reinvent ourselves as a takaful or retakaful operation seems unnecessary.
STEPHEN MAY: With the greatest of respect, it’s just a mutual. You have mutuals and you have insurance right here in the centre of the universe, so there’s no reason why we shouldn’t offer the same wherever we go.
CHRISTOPHER PLEASANT: It’s a version of mutual insurance, but with some restrictions and some different ways of handling money, and obviously the guidance of a Sharia committee that decides what is right and what is not right. But it’s pretty similar and I don’t see why we shouldn’t follow the other major reinsurers that have gone that route and opened up a takaful facility.
AHMED RAJAB: If you look at Saudi Arabia, there’s not one company to my knowledge called a takaful insurance company—all companies are called co-operative—it’s just a matter of wording. They all operate under the same principles.
HELEN YATES: How is business transacted in the GCC, and how big a role do the brokers play in placing the big risks?
CHRISTOPHER PLEASANT: There’s still a big influence by the large European reinsurers because the market is still a fairly proportional treaty market. On facultative risks, it’s somewhat different—but those come into Europe if they are large and complicated enough. But increasingly, we’re seeing business that is ceded to treaties and then passed around from one company to the next. Even quite large risks are being absorbed in the region. We’re starting to see a move away from dependence upon proportional treaty, and I think the brokers will play an ever-increasing role in that.
AHMED RAJAB: It’s a big broker market. For our side, Willis has been in the region for more than 30 years and we have almost 150 people there on the ground. A lot of the large mega risks are driven by brokers.
STEPHEN MAY: There are some relationships between the financial institutions and major corporations that will take some time to change. The brokers are often working in an environment where there are already clear stakes in the ground.
HELEN YATES: How much business do you see being placed locally in years to come, and is it telling that a number of local reinsurers have been set up in the region in recent years?
AHMED RAJAB: We are definitely placing more and more business in the region. This is because underwriters and reinsurers are very close to the insurance companies and to their clients, and they have access to more information and knowledge about the risks than they would if they were sitting here in Europe.
STEPHEN MAY: It does vary from place to place. The UAE, with its laws about local companies writing local business, creates one set of circumstances, and then a place like Qatar, where that is not prevalent,
creates another set. It’s easier to pass a large Qatar risk into the world markets than it is with a large Abu Dhabi risk.
NICK CHARTERIS-BLACK: Presumably, the market will evolve like any other market anywhere in the world. The market will over time evolve and there will be more local placements as capacity and expertise build up.
CHRISTOPHER PLEASANT: You’ve got companies there that were established purely to write the region—new reinsurers that were established with part local money and part international. And you’ve got European and London companies establishing locally and, again, the underwriter’s job is dependent on writing local business. This makes them keener to do business than somebody in London who can write business that comes in from anywhere in the world. I think that’s one of the driving factors in people establishing out there—they don’t want to miss out on what is becoming a regional centre.
HELEN YATES: Are there any final thoughts on opportunities in the Middle East now and in the future?
CHRISTOPHER PLEASANT: The oversupply of capacity is a major concern, but as regulation comes in, we might see some mergers and acquisitions.
TIM GRIFFIN: Picking up on the oversupply of capacity, I’m intrigued to see, as our development there picks up and we get to grips with the rating environment and the claims culture in the region, whether or not it is genuinely cheaper or whether we’re just operating in a different environment. We’re still seeing risks going out of the region that are extremely oversubscribed in London, so if it was all that bad it wouldn’t be happening—or would it?
AHMED RAJAB: We still have real opportunities in the Middle East, primarily because we will see more acquisitions and strategic alliances between the operators on the ground. We will see companies creating new lines of products and new distribution channels. One of our clients who had been operating with just one head office in one city has expanded and opened 29 different regional hubs to write business in Saudi Arabia in just six months. So there are opportunities for all players.
HELEN YATES: So you haven’t missed the boat if you’re not already there?
AHMED RAJAB: No, you haven’t, but you have to innovate, and it’s harder than before.
STEPHEN MAY: And starting 30 years ago would have been better!
TREVOR OATES: I think you need to spend time on the ground and to research what the opportunities are that are of interest to you as a reinsurer and, likewise, what you provide as a reinsurer that may be needed on the ground that isn’t necessarily available locally.
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