Mr. Salvatore Orlando, Head of Middle East, Africa & Russia at PartnerRe, discussed in this interview the developments of the insurance sector in the GCC countries, and the role of the supervisory bodies to achieve this growth. He also talked about Partner Re’s presence in this market and its future plans.
* How can you describe the development of the insurance sector in the GCC countries in general, and Saudi Arabia and the United Arab Emirates in particular?
Despite economic headwinds and geopolitical instability, the GCC insurance market has been highly resilient. Personal lines are benefiting from expanding compulsory insurance requirements as well as pricing support from regulatory action, mainly in the Motor lines of business in United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (KSA). Commercial lines have also improved, following some fire losses on the Property side together with regulatory influence.
The low insurance penetration offers the greatest potential for growth with ratio of premiums to GDP being only a quarter of the worldwide average.
The insurance opportunities offered by the GCC market go far beyond infrastructure projects and compulsory lines of business. Major segments of the population such as expatriate blue-collar workers, remain virtually uninsured, placing significant contingent liabilities on their host countries. Insurers and reinsurers that can work together to offer innovative micro insurance solutions distributed via non-traditional channels such as service providers, will be well positioned to tap these potential growth areas in the GCC.
* What procedures should be taken by the supervisory bodies in the insurance sector to achieve further growth and development?
The region has already seen an increasing regulatory framework with the introduction of a risk-based capital solvency regime as well as more qualitative risk management requirements. The enforcement of unified policy wordings as well as the introduction of actuarial pricing and reserving review in various lines of business should further strengthen the insurance market in the GCC.
For regulators, the challenge will be to ensure that they have sufficient resources to execute their mission, enforce the rules they prescribe, and prevent processes around compliance from becoming overly bureaucratic.
The implementation of these new solvency regimes will likely lead to further consolidation in the market with mergers and acquisitions continuing to be theme for the coming years.
* What about your presence in these markets? What are your future plans?
It’s an interesting time to be in the market. On one hand there is huge opportunity for cedants to grow their businesses through new income streams, particularly related to micro insurance products. On the other, there is need to increase the knowledge and expertise in the market and for access to reinsurance capacity to fully capitalize on those opportunities.
This is a time that cedants need their reinsurance partners the most and PartnerRe is fully committed to the market and to our client partners. For example, we are investing our time and sharing our expertise by partnering with our clients to hold workshops aimed at developing young reinsurance professionals and to spread our know how in different lines of business in the whole region. To underline our continuous commitment to the region we have also hired two new P&C underwriters dedicated to servicing clients in the Middle East and Africa.
In spite of shrinking reinsurance capacity due to poor market results and higher costs, we continue to provide property fac support to our partners, because as a privately owned reinsurer, we can take a more holistic and long-term approach to our client relationships.
As a result, our brand is now well-established in the market, our selected clients know us and we know them well. Our aim for the future is to be seen as a regional market leader and to continue to grow our book by further expanding our client base and our portfolio of risks in the region, particularly in cyber insurance, micro insurance, agricultural insurance and credit insurance.
How will we do this? By continuing to take an innovative, solution-driven approach to bringing new products to the market that will help our clients grow their businesses.
* The renewals at the beginning of the year showed a limited rise in prices…
• What’s your opinion in this regard?
• Do you think we’re at the beginning of an upward trend in prices?
We saw limited price increases at the last renewals. However, there are definitely signs of hardening in the Commercial Property market mainly in KSA and UAE whether it is as a result of an increase in price or an increase in retention.
