Insurers have no choice but to go back to basics and price their offerings prudently, said Mr Omer Hassan Elamin, Group President, Orient Insurance Group, in his keynote address at MEIR’s 10th Anniversary Summit in Dubai.
Commenting on the theme of the Summit, “Underwriting for Profit: Myth or Reality in Today’s World”, he said the unstable regional situation, which puts additional pressure on investment returns and stock markets, should direct insurers to seek technical profits and become real risk carriers instead of relying on reinsurance commissions.
Mr Elamin noted that reinsurers have started stiffening their procedures and scrutinising risks more closely, especially after the recent fires in high-rise buildings in the UAE. He urged the industry to resolve this issue before reinsurers start declining such risks.
He noted that market players have agreed with some major international reinsurers on setting certain standards on terms and prices, leading to “some promising increases in prices, but still away from our target”.
Retracing the industry’s beginnings in the region, Mr Yassir Albaharna, CEO, Arig noted that insurance started with foreign branches but with time, and along with the liberalisation in several markets, the number of players has grown excessively. “The market should survive with less players but sadly, regulators are still licensing new companies,” he commented.
Mr Albaharna added that the Arab Spring has changed the shape of the region and is prompting insurers to be more attentive as it has shifted the governments’ priorities in the region. He also called for regulations to be harmonised, without which they will hinder Middle East companies from expanding regionally.
Dr Bassel Hindawi, Chairman/ CEO of DIFC Insurance Association, established one year ago and now has 36 full and 12 associate members, said as the world gets riskier, writing for technical profits has increasingly become a necessity, but the collective will of the market is need to accomplish this goal.
Views from London
Mr Richard Bishop, CEO of Cobalt said that as emerging markets develop, expertise should improve as well, adding that the biggest challenge for insurers is to prove their relevance by delivering products in response to client’s needs.
Mr David Matcham, Chief Executive of the International Underwriting Association of London (IUA), said one of the strengths of the London market is the ability of its players to work together. He observed that the London Market Group (LMG), which was established to include various associations and practitioners, has succeeded in creating solid market conduct, responding to market requirements following 9/11, strengthening market discipline, and setting up an electronic claims system.
Developing regulations
The region’s regulatory frameworks are still immature, necessitating greater cooperation between operators and regulators, said Mr Ahmed Al Mamari, Director General of Insurance, Supervision, Capital Market Authority (CMA), Oman. He urged insurers to reduce their dependence on reinsurance and increase their retention levels, and said that while flexible regulation encourages innovation, operators have a larger responsibility in this regard. Among CMA’s plans by the end of next year is to see insurers listed, increase the capital requirement to OMR10 million (US$26 million), and draft new regulation for takaful, he said.
Mr Arvind Baghel, Director, Supervision with the Dubai Financial Services Authority (DFSA), said that while the DFSA focuses mainly on three areas – ensuring financial stability, protecting consumers and playing a development role, the focus is increasingly on satisfying consumer needs.
Mr Prasanna Seshachellam, CEO, THEJAS Consulting LLC expects regulations to keep up with international standards and focus more on supervision, especially risk-based supervision. However, applying this requires a lot of talent and experience, and this is where the challenge lies.
Mr Kevin Willis, Director and Sector Specialist Financial Services Ratings, EMEA with Standard & Poor’s, expects that capital market developments and regulatory changes will facilitate a shift to less risky investment portfolios. He predicted that GCC premium growth will continue to exceed GDP till 2019, and that penetration will deepen but not to the world average of 6%. The economic slowdown would encourage innovation, sector diversification and feed life premium growth, he added.
Mr Sanjay Jain, MENA Insurance Leader, EY said the maturity of regulations in the GCC varies in areas such as implementing regulations and supervision enforcement. He pointed out that the level of compliance is very low with only 41% of companies having risk management schemes in place, according to an EY survey of Saudi Arabia and the UAE.
Mr Mohammed Ali Londe, Assistant Vice President – Analyst, EMEA Insurance with Moody’s Investors Service, said that lack of corporate management and risk management among GCC operators has led to misalignment in exposure to risk. He added that with the new solvency regulations in the UAE, some companies have started to submit risk reports.
CEOs’ perspectives on growth
Takaful has a great opportunity as a business model which has relevance to clients, said Mr Gautam Datta, CEO of National Takaful Co (Watania). The biggest challenge, lies in regulatory constraints in terms of meeting capital requirements, he said. Takaful operators need to play a role that is complementary, rather than competing against conventional insurance, though the principles of underwriting are the same.
Mr Ajmal Bhatty, Member of the Board, Tokio Marine Middle East, said regulators should not deal with takaful differently as the risks covered are the same. He said that the difference lies in how to understand the nature of takaful in areas of investment and surplus distribution, which remain essential to mainstream takaful.
Mr Fareed Lutfi, Secretary General of the Emirates Insurance Association (EIA), said that regulators still need to reinforce laws in MENA markets as self-regulation among the industry is still weak. He pointed out that poor-performing companies will find it difficult to continue and there is a need for proper underwriting strategies and risk management measures.
Medical needs special attention
With medical insurance is growing fast and accounting for about 50% of the region’s insurance business, Mr Christian Gregorowicz, CEO, NEXtCARE & CEO, MEA, Allianz Global Assistance called for stronger regulations to control malpractices and the need to look into talents shortage.
Dr Dennis Sebastian, Regional Director – Health, RGA Reinsurance Company Middle East Limited, UAE, gave a comprehensive look at the progress of the compulsory health insurance in the GCC, noting that compulsory medical for expatriates is the key driver for growth. He noted that this market has been significantly distorted by the asymmetry of information between consumers and providers, while the demand for services is increasing.
Building talent
To spur innovation, there is a need to attract young people to join the industry, noted Dr Suzanne White, Managing Director, Oasis Training Center, Bahrain. She urged insurers to invest in training young professionals as they often do not understand the product they sell.
Mr Stephen Aspinall, Regional Director MENA, Chartered Insurance Institute (CII), said providers should work to change the perception of the industry to attract young and talented people, noting that only 4% of job seekers in the UK consider joining the insurance industry.
Dr C H Asrani, CEO, X-CLAIM, India, said the long-term return is what attracts talent to the industry. He stressed the importance of career enhancement training for this purpose without overlooking the market’s needs and realities when designing training schemes.
Mr Silvan Said, Managing Director, RISC Institute, UAE, said more emphasis should be placed on building competencies, as this is directly linked to the profitability of an insurance firm. He said that core competencies are industry-specific skills which should lead to high levels of customer satisfaction.
DIFC strengthens foothold
The DIFC is reinforcing its position as the region’s trading and financial hub and playing a major role in harnessing international interest with its strong regulation and integrity, said Mr Ian Johnston, Chief Executive, Dubai Financial Services Authority (DFSA). The low economic growth and depressed interest rates stress the need for prudent regulations and robust management, but despite the difficulties, there are growth opportunities in the Middle East, he pointed out.
He added that the DIFC has succeeded in supporting better underwriting and risk management practices across the region, yet flexibility is still a key consideration. Among the DIFC’s main factors of success are robust regulatory and legal systems, conforming to international standards, nurturing a deep pool of talent and quality infrastructure, he said.
Digital transformation
Only 37% of companies in MENA are undergoing formal digital transformation and there is a need for holistic change to move to the next level, said Mr Sai Subramanian, Vice President – Innovation and Technology, Sidani Innovative, Management Services, UAE. He noted that digital transformation is key to increasing both the top and bottom lines, and that organisations should enhance, extend and transform what they offer to the customer, he added.
Mr Willis observed that technological changes will alter the insurance product market, while for Mr Gregorowicz, a big challenge is to adapt to the digital way of selling insurance.
Underwriting dynamics
Regulators in the region have raised the bar and are starting to look into solvency in order to improve the markets, said Mr Matthew Warren, CEO, Talbot Underwriting (MENA). He was optimistic that demand for specialty products would grow and provide new windows of opportunities.
Mr George J Kabban, CEO, UIB (DIFC) said players should not engage in price fixing and setting tariffs because this goes against free market conditions. He added that regulators should take responsibility in assigning competence underwriting standards, though many do not have enough political clout. He said players need to compete in the right way and despite the global economic conditions, there remain opportunities.
Mr Paolo Carrozza, Director Market Management, Commercial Underwriting & Distribution – Gulf Countries, Euler Hermes, called on insurers to collaborate with clients to create a profitable book of business and provide the necessary protection for policyholders – a win-win situation for all parties in the long-term.
Mr Christopher Miers, CEO of Probyn Miers called for stronger collaboration between homeowners and insurers for the benefit of all. He also recommended data and risk information to be shared among insurers to create more precise risk profiles and healthy underwriting measures.
Organised by MEIR with MENA Insurance CEO Club as strategic partner and the support of the DIFC Insurance Association and the International Insurance Society, the two-day event attracted industry professionals from the region, the London market and beyond.