That there is tremendous potential for the growth of reinsurance in the Middle East is not in doubt.
There is also little doubt that the Dubai International Financial Centre (DIFC) has developed an impeccable reputation as a trusted and well-regulated centre for financial services in the region. The fact that Dubai itself offers a lifestyle that is safe, comfortable and attractive for senior financiers and their families is also critical to the success of the financial centre.
We spoke to DIFC chief executive officer Arif Amiri about the centre’s position as the region’s reinsurance hub and about how much growth potential he feels reinsurance has in the wider GCC region.
“According to the S&P Global Ratings GCC Insurers in 2022 Report and Swiss RE sigma No 3/2021, the GCC’s total GWP stands at $28bn with the UAE being largest insurance market in the GCC,” said Mr Amiri. “The country-specific trends highlight that the year-on-year growth is stable across Saudi Arabia, Kuwait, Qatar, Oman and Bahrain. This growth emanates from the mandatory health line, as well as P&C insurance. The improvement was evident in 2021, which was a positive year of growth that is expected to continue for the next few years.”
Opportunities in cyber
The DIFC also undertook its own research to test the temperature of the market. “DIFC also conducted an independent market survey during Dubai World Insurance Congress where our respondents signified their strong confidence in the whole MEASA market over the next 12 months,” said Mr Amiri.
“Lines of business where they see growth opportunities are cyber, liability, property and energy. Owing to the pandemic, use of digital transactions online accelerated. This also means that the cyber risks increased significantly.
“As an innovation hub, DIFC has also seen significant rise in innovation and tech companies that are changing the dynamics of financial services. The digital aspirations of these companies suggest there needs to be a serious focus on ensuring they are well-protected for potential losses from malicious cyber attacks and ransomware. Cyber, therefore, presents itself as a huge opportunity for this emerging market,” he said.
The opening up of the markets within the GCC and the thriving business activities of the banking sector allows projects that stalled during the height of the pandemic to continue.
“The continuous build of physical infrastructure, and commercial and residential properties are opportunities for the reinsurance market in the region,” said Mr Amiri. “Property underwriting, we expect, would find more opportunities as all these plans continue.
“Sustainable energy is another growth potential for the reinsurance industry. Whereas the region is known for its oil and gas industry, the move to clean, renewable energy using other technologies and infrastructure will also require reinsurance cover and technical support, and this is an area where specialised reinsurers could find new opportunities for growth,” he said.
The role of a financial centre With the growing opportunity presented by increased reinsurance demand, what part can DIFC play in being a central hub for the region?
“DIFC plays a crucial role in being the centre of excellence for reinsurance in the region,” said Mr Amiri. “Having over 100 insurance-related companies in DIFC including 84 DFSA-regulated companies, the talent and technical expertise of our centre’s reinsurance market offers well-regulated, international standards of underwriting with strong capacity from well-rated companies across the globe. The DIFC brings these important elements to the region with a regional flair and an understanding of the markets’ culture and landscape,” he said.
The DIFC is also committed to improving talent in the region through the presence of the Chartered Insurance Institute in DIFC, as well as collaborative efforts with the DIFC Insurance Association.
“We believe that part of our role as a central hub is to help the region build further awareness of insurance and of the relevance of proper risk management,” said Mr Amiri.
To that end, the DIFC has undertaken various initiatives over recent years to make itself ‘reinsurance friendly’.
“We maintain an open dialogue with our own independent risk-based regulatory body, the Dubai Financial Services Authority (DFSA),” said Mr Amiri. “These conversations with the market and with the DFSA have always been a priority because they encourage innovation not just in the technical aspect of things but also with new products and licenses.
“As an example, the ability of DFSA to accept applications for the new Lloyd’s license, syndicate in a box, helps encourage international benchmarking for regional players. As we speak, we now have an application in the pipeline waiting for its full license, which we expect to come through in the coming months. The ability of our regulators also to accept innovation testing license applications to test new and innovative financial products, services and business models, is also an encouraging way to attract start-ups in the centre,” he said.
Regulation and data protection
The regulatory environment of the DIFC is leading in the region and is comparable to other advanced markets in the world. “This allows us to bridge the gap between centres such as London, Zurich and Singapore,” said Mr Amiri. “We also have world-class data protection and intellectual property laws that give our reinsurers the level of comfort to operate in a jurisdiction that is familiar to international players and encourages them to develop new products designed to meet the region’s needs.”
Building on success
The centre continues to look towards making itself even more attractive to reinsurers in future by engaging with local and regional regulators to ensure alignment and understanding of the retail market’s requirements.
“Committing to the promotion of the centre’s reinsurance market through regional and global roadshows and events is important,” said Mr Amiri. “Through close work and exchange of ideas with trade associations and channel partners, we spread the word of our DIFC reinsurance market’s capacity and capability to handle risks, be it through facultative or treaty underwriting. The DIFC platform brings the technical expertise closer to its customers and this is what our reinsurers utilise. The DIFC draws cedants and brokers from the GCC, Africa and South Asia and other parts of the Middle East,” he said.
Captives up next
Further developing the captive regime with the regulator and promoting it to regional companies will also present opportunities for reinsurance.
“As a captive domicile in the region, DIFC is seeing more and more regional companies exploring captives and setting up their own for their regional insurance programmes,” said Mr Amiri. “The reinsurance support is crucial for captives, as this helps indemnify some or all the liability assumed by these captives. The DFSA has recently adjusted the DIFC’s captive regime, making it at par with leading captive domiciles around the world.”
Digitalisation has helped the centre develop a better experience for clients as well as a cohesive and efficient ecosystem.
“We want our clients just to focus on doing business, so we created a model where DIFC’s offering is business-friendly and efficient,” said Mr Amiri. “By digitalising the onboarding and licensing renewal process, offering convenient work permit issuance for the staff including Golden Visas, and providing unique client relationship management, we are offering a one-stop shop for clients to operate smoothly in the centre.
“We are also enhancing our offering as a financial free zone by continuing to develop the state-of-the-art infrastructure and lifestyle in DIFC to make it attractive for talent to come and work in the centre,” said Mr Amiri. M
African reinsurer joins the fray
As the reinsurance capacity and profile of DIFC continue to grow, we spoke to a new entrant to the centre to find out why the reinsurer was drawn to open there. Africa Re’s Mr Mohamed Saad shared some valuable insights.
What was the business case behind Africa Re opening an office in DIFC?
As one of the top 50 global reinsurers, Africa Re considers DIFC as a first step to be followed by further steps for other financial hubs across the world. Africa Re may be new to DIFC but is not new to the Middle East, which we have supported for the last 20 years. We closely observed the withdrawal of reinsurance and retakaful capacities from the Middle East - hence a decision was taken to join DIFC in order to be in proximity to our clients and fill such gap of capacity through providing leading opportunities as support to all our longstanding clients in the Middle East.
Our areas of expertise include underwriting proportional and non-proportional, marine and non-marine, treaty business, offshore and onshore energy including oil, gas, petrochemicals, power and other utilities, as well as general property.
Africa Re will provide conventional and takaful reinsurance capacity to the whole Middle East region from DIFC including GCC countries, Levant and Turkey. The firm has over a decade of providing retakaful products which are shariah-compliant and essential for takaful companies to meet their business requirements.
Will reinsurance business be ‘new’ business – or will it have been won from other geographies?
DIFC, as a reinsurance hub, currently enjoys all factors of business growth starting from the existence of very active reinsurance companies to international intermediaries and finally the clients coming to place their business inside DIFC.
How has your business from DIFC fared since you opened compared to your forecast?
DIFC as a reinsurance hub has made a big difference in terms of quality and quantity of business being offered and considered by Africa Re - DIFC office as we can see that most of the reinsurance business is currently flowing inside the DIFC and most of it is normally absorbed by reinsurance companies operating inside DIFC through the DIFC intermediaries. This is exactly what we mean by proximity to clients. Africa Re - DIFC has announced a decent profitability from its first financial year of 2021 and expecting profitability to continue through 2022.
Is there anything else that can be done to help reinsurance in DIFC grow further?
DIFC is recognised as the leading reinsurance hub in the MEASA region and now home to more than 100 registered insurance, reinsurance, captive firms and insurance-related entities, including four of the top five global insurance companies. In 2019, the DIFC reported record gross written premiums, up 17.4% y-o-y. This has all be achieved through the solid regulatory framework that enables all DIFC companies to transact business professionally and safely. Growth, development and enhancement inside DIFC is a process that never ends. M
Mr Mohamed Saad is senior executive officer with African Re Underwriting Agency.