The shift eastwards was seen as significant at a time when many reinsurers were looking to diversify their portfolios geographically and considering opportunities in emerging insurance markets.
Robert Bisset, chief executive officer of Aon Benfield (Bermuda) Ltd.,
was impressed with the seniority of participants attending. “When you’re getting the likes of Michael Butt, Greg Case, Grahame Chilton and Henry Keeling—it was a heavy duty crew who went out there to support it. So I thought that was very significant.”
The conference was hailed a great success, with more than 400 delegates
attending from seven continents and 33 countries, 52 international speakers, and representatives from the major international re/insurers.
At the time of the conference in March 2008, before the financial crisis
had set in, the growth statistics for the region were reason enough to find out more about the Middle East, with the non-life sector expanding by over 12 percent in 2007, according to Swiss Re Sigma. While the level of growth has since slowed as a result of the crisis and the lower price of oil, long term, the prospects continue to look good.
Hoping to benefit from the longer-term opportunities, a number of
Bermuda players have opened offices in the Middle East market. ACE has long been active in the Middle East and North Africa (MENA) region, with businesses throughout the area, including ACE Arabia Cooperative Insurance Company (Saudi Arabia) and ACE American Insurance Company (Bahrain branch). Class of 2005 company Flagstone included the Middle East in its ambitious geographical expansion, opening Flagstone Underwriters Middle East in the Dubai International Financial Centre (DIFC) in 2007.
In a $400 million joint venture with Gulf Investment Corporation, Arch
Capital announced it was launching Gulf Reinsurance Ltd. at last year’s World Insurance Forum. Gulf Re joins a handful of regional start-ups, including Asia Capital Re and Saudi Re, specifically targeted at the six member states of the Gulf Cooperation Council (GCC), which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.
Aon also has a number of offices in the region—including in the UAE,
Qatar, Saudi Arabia, Oman and Bahrain. Bisset thinks the Gulf is a logical choice for Bermuda companies looking to expand. “Bermuda reinsurers are all looking to grow and they’ve all employed a similar playbook, whether it’s Lloyd’s syndicates or E&S companies in the US. Now I think they’re trying to figure out where the next growth areas are, and the Middle East is often mentioned along with the Far East.”
The fact that the Middle East is not prone to natural catastrophes makes it attractive from a diversification perspective. Most Bermuda re/
6 | INTELLIGENT INSURER | Middle East Report 2010
“ Cash-flow underwriting has been a feature of the primary insurance market in the Middle East for many years, with insurers described as ‘risk traders’ rather than ‘risk takers’, as most of the premium is ceded on to reinsurers.”
insurers have significant catastrophe exposures in the US, Europe and other parts of the world. Balancing this with a non-cat market such as the Gulf helps to create a healthier portfolio. And the Gulf is also ideally located from a geographical perspective. “It’s definitely a non-cat market and that’s appealing,” says Bisset. “My understanding is that a number of the Bermuda companies are looking for a launching pad into a number of different areas, and if they can establish in the Middle East, they can use that as a launching pad into India and other developing areas.”
Not being exposed to natural catastrophes also means premiums remain
very low in the market. Cash-flow underwriting has been a feature of the primary insurance market in the Middle East for many years, with insurers described as “risk traders” rather than “risk takers”, as most of the premium is ceded on to reinsurers. Reinsurers entering the region need to keep both their expectations and venture modest, thinks Bisset. “Given the low premium volume, they’d have to rely on the mother ship for a lot of the resources.”
For start-up Gulf Re, the focus is long term. “This is a very small
market,” says Gulf Re chief executive officer Gail Norstom. “The whole Middle East is less than one percent of the whole world’s non- life premium, so there are not immense financial rewards to be gained here in the short term, because it’s a small market and there are lots of competitors. But it’s a growing market and its rate of growth is higher than that of the more mature markets. So if a company has patience and it wants to invest in a business model that works in the region, there are gains to be had.”
Gulf Re’s initial target is high-value oil and gas, industrial, utility and
transportation assets in the GCC. It writes a broad range of property and casualty lines of reinsurance on both a treaty and facultative basis. Premiums for treaty reinsurance remain very low by US, European and Bermuda standards, reveals Norstom. While rates are higher on
he decision to host the eighth World Insurance Forum (WIF)—a biennial re/insurance event—in Dubai came as a surprise to many, not least because its traditional home had been in Bermuda.
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