Jan
26
HDFC Life Going International
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In an attempt to capitalize on the increased spending power of India’s sizable overseas workforce, HDFC Life, one of the country’s leading private life insurance companies, announced this week that they have opened a representative office in Dubai – the company’s first international operation, with more to come.
It is estimated that of India’s 1.3 billion population, more than 25 million are now currently living and working abroad. Indian expatriates make up a significant proportion of the working class across the MENA region, with many moving to the rich Gulf States during the oil boom to work in construction and in other more specialized fields. The Gulf has proven to be an attractive destination for South Asian migrant labour due to the higher incomes available, employment opportunities as well as the relative geographical proximity to India. Nowadays, roughly 40 percent of the United Arab Emirates’ population is of Indian descent. This considerable demographic development has however presented a problem for the Indian diaspora, as citizenship and residency rights are seldom granted to immigrants in these Gulf countries. Maintaining affordable access to necessary services like healthcare and retirement planning thus becomes an issue for many non-resident Indians.
Announcing the launch at a press conference in Dubai on Wednesday, Anup Rau, HDFC Life Executive Vice President and Head of Sales and Distribution, told reporters that the insurance firm would use their new representative office in Dubai to more effectively target the estimated 1.7 million non-resident Indians (NRIs) currently living and working across the United Arab Emirates, and forecast Rs300 million (US$5.9 million) in premiums by the end of the first business year. HDFC Life predicts significant growth as demand for insurance products will continue to increase in conjunction with rising personal incomes and demands for greater protection, investment and savings, and retirement needs.
HDFC Life has officially been operating out of Dubai for nearly three months now and, according to company officials, has already witnessed strong interest from the local Indian workforce for its life insurance products. “There were inquiries from NRIs to buy HDFC products estimated at Rs50 million (US$1 million) in the first three months,” Rau told attendees, adding that the company’s prime target will continue to be “white-collar NRIs returning home for some reasons.” Observing this considerable demand, the company has already hired nine people to work its Dubai office, with more to come if need be.
HDFC Life decided that Dubai would be the host of its first overseas subsidiary as the city-state is currently home to the largest population of NRIs in the Middle East. The insurer will then use their new representative office in Dubai to properly test the Gulf insurance market and adjust their regional business strategy accordingly going forward. HDFC Life plans to enter other GCC countries are on hold due to Indian industry regulations, which do not allow locally domiciled insurers to launch full operations or set up joint ventures in international markets without exhaustive regulatory procedures. However, as Rau explains, the success of the Dubai branch will ultimately decide HDFC Life’s international expansion plans going forward, both within the Gulf region and globally. “The launch of our operations in Dubai is the beginning of HDFC Life’s expansion into the region. The objective of this office would be to serve our existing policy holders and further understand their financial needs better,” Rau said.
HDFC Life is a joint venture established in 2000, between Housing Development Finance Corporation Limited (HDFC Ltd.) and Standard Life Assurance Company, one of the United Kingdom’s leading financial services firms. The joint-venture company has been quick to expand in its home market over the past decade, and now boasts one of the largest distribution networks for an Indian private insurer with over 500 branches servicing customer needs in some 700 cities and towns across the populous South Asian country. While there is still considerable scope for insurers in India to increase their coverage in a country with a population exceeding a billion people, most uninsured, HDFC Life believes that now is the time to look outside the country and will leverage its strong brand presence and existing clientele to market to and eventually through the sizable global Indian diaspora. “HDFC Life is a preferred and trusted brand in India and has diverse product portfolio catering to the different life stage needs of an individual,” Rau explained, adding that “with a strong brand proposition, well balanced product portfolio, need-based selling approach, long-term investment philosophy, and above all a strong lineage, HDFC life aims to successfully establish its presence in the [GCC] region within the next few years.”
Commenting further on HDFC Life’s strategy and reasons for continued international expansion, M.I. Taher, Vice President and Head of International Business, noted that entering Dubai at this time was a crucial step in the evolution of the company, one which could put HDFC Life on course to compete with more prominent multinational insurance companies in the near future. “The objective of our operations in Dubai is the first step towards understanding the Gulf market, the customer segments, apart from serving our existing policy holders and further understanding their financial needs,” Taher said. HDFC Life’s products are aimed at Non-Resident Indians in the UAE in order to better cater to their insurance needs, and needs of their families back home. “Our presence in this region will help us research the market better and devise new products catering to the specific needs of the NRI’s here,” Taher concluded.
Insurance Company Mentioned
HDFC Standard Life Insurance Company Ltd
HDFC Standard Life Insurance Company Ltd. is one of India’s leading private life insurance companies, which offers a range of individual and group insurance solutions with a strong base of financial consultants. The company provides a line of protection, retirement, savings and investment, children, health, and group plans. It is a joint venture established in 2000, between Housing Development Finance Corporation Limited (HDFC Ltd.) and The Standard Life Assurance Company, a leading provider of financial services from the United Kingdom.
Jan
20
New Health Insurance Deal in Jordan
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Arab Orient Insurance Company (AOIC) made news this week by finalizing their partnership agreement with French insurer SCOR, who will now re-insure their health insurance portfolio, one of the largest in Jordan.
In a press statement, AOIC Chief Executive Isam Abdelkhaliq, heralded their new joint venture as an important step for both the Jordan health insurance market and his company. “This agreement adds a new dimension in the medical insurance market in the region and is a record for the great achievements by Arab Orient Insurance Company.” The deal was reached at the signing ceremony at SCOR’s Cologne headquarters in December 2011, with each company’s president and top executive in attendance, but took until mid-January to receive the necessary approval from Jordanian regulators to proceed.
Health insurance represents the second largest segment in Jordan’s insurance market. In 2010 health insurance premiums amounted to JD93.9 million, or 23 percent of the domestic market’s total output. Over 80 per cent of Jordanians are estimated to be covered by some form of health insurance at present, either in public or private schemes, and the Ministry of Health has stated its intention to expand coverage to all citizens by 2014, a reform idea shared by many neighboring Gulf countries. Individual insurers in Jordan cater to a small private sector, as public healthcare is provided to public sector employees through various government-run insurance schemes. Despite this, medical insurance business has grown at compound average growth rate of roughly 16.6 percent over the past ten years and the long term trend for greater medical coverage seems to be towards higher volumes and perhaps sustainable premium growth. The Jordanian health insurance market is not without it’s problems however, suffering from low profitability in recent years on the back of intense competition, which has placed downward pressure on policy prices while the costs of medication and medical services continue to rise. Despite these limited margins however, local insurers simply cannot afford to limit their exposure to medical insurance as it continues to be a major revenue source and greater international attention is surely imminent.
AOIC was established in 1996 and has gone on to become one of the leading non-life insurance and reinsurance companies in Jordan, in terms of premiums. The company was the first accredited insurance company in Jordan and is also one of only two Jordanian companies to be rated ‘B++’ or higher for four consecutive years by ratings agency AM Best. In accordance with the rising demand for healthcare and financial products occurring throughout the Gulf Region, AOIC has shifted its focus increasingly to providing comprehensive medical insurance services through new partnerships, products and distributions channels, which will provide services and medical programs to its agents through the best coverage and the broadest medical network. The deal with SCOR, whom they describe as “one of the largest companies for medical re-insurance in the world” in their statement, will provide AOIC will the necessary capacity and financial security to both care for their existing Jordanian customers and pursue new long-term business opportunities as well.
Mr. Abdelkhaliq added that partnering with prominent Western insurers has enabled the company to tap into overseas industry expertise and improve the quality of their coverage and service options to better match international standards. “In addition, the signing of this agreement solidifies the effort of the medical insurance staff, a collective of highly experienced administrators, doctors and nurses who work around the clock to provide renowned quality service to the 185,000 customers providing the best coverage and the largest medical network in the Kingdom,” Abdelkhaliq said. Last year the company entered a similar partnership with British healthcare provider BUPA to upgrade and review the health insurance products and services available in Jordan. AOIC has also taken greater steps to better integrate their customer service experience, launching two fully functional service and care offices at Arab Center Hospital and Ibn al-Haytham Hospital in January, with more branches expected to launch at The Specialty Hospital and Jordan Hospital later in the year. AOIC has aimed to distinguish itself further in the market by launching these new offices, hoping that customers will appreciate a more efficient administrative process in affiliated hospitals.
For SCOR meanwhile, Jens Sonnenschein, Head of Middle East Departmental Director, explained that their decision to partner with one of the largest non-life insurance companies in the Middle East would not only expand their geographical footprint considerable but could work to enhance the medical insurance business in Jordan’s insurance market. Scor has been looking to strengthen its position across global reinsurance markets as part of the company’s 2010-2013 strategic plan, titled “Strong Momentum.” The plan has targeted improved profitability and solvency combined with a rebalance between life and non-life contribution inside Scor’s portfolio. In accordance with this strategy, SCOR sold its US fixed-annuity business for US$55 million in February 2011 in order to free up capital for expansion of its core life reinsurance businesses. The French reinsurer then completed the ambitious acquisition of Transamerica Re, a life reinsurance division of Aegon, for US$912.5 million in August, becoming the second-largest US life reinsurance company in a move to better develop value added services for its insurer clients.
According to their most recent earnings bulletin, SCOR has done well by their expansion strategy so far. For the first nine months of 2011 SCOR’s premium income was €5.421 billion ($7.345 billion), up by 8 percent on the corresponding period in 2010. The French insurer’s third quarter reporting period, the first in which newly acquired Transamerica Re was included, has been a particular highlight, with gross written premiums surpassing €2 billion in a quarter for the first time, and up 14.7 percent on last year. SCOR Global Life gross written premiums meanwhile hit €984 million, a 30.5 percent annual improvement, with the Transamerica Re’s business contributing over €256 million since August 2011.
Multinational insurers like SCOR will continue to look towards markets in the Middle East and North Africa region as a rich and sizable prospect base to tap. Although the recent Arab Spring protests may hinder insurer business in the short term, there is still considerable opportunity for foreign investors to build the insurance trade across the MENA region.
Insurance Company Mentioned
Scor
Scor is organized through two main businesses – SCOR Global P&C and SCOR Global Life – which are leading underwriting and reinsurance providers. The group writes business in Europe, Latin America, Asia, the Middle East and the USA.
Jan
10
S&P Report on Saudi Insurance Market
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Fresh analysis released this week by one of the world’s foremost industry information and ratings agencies, Standard & Poor’s (S&P), reveals the challenges and opportunities that players in the Saudi Arabia insurance market will likely face throughout 2012 and beyond.
In ‘Underwriting Sustains Profitability In Saudi Arabia’s Increasingly Competitive Insurance Industry’, S&P observes that despite stubbornly low interest rates and a more crowded protection market with increased international attention, Saudi insurers should be able to maintain profitability going forward on the back of the Kingdom’s continued overall socio-economic development and the accompanying demand for more protection and savings solutions. With a population now exceeding 27 million people, Saudi Arabia represents the largest insurance market in the GCC and has witnessed considerable growth since the insurance business was first allowed in the 1990s. S&P noted that the Kingdom’s domestic insurers have seen their businesses expand in particular over the past few years from the introduction and increased awareness and availability of health insurance products and services. After compulsory medical insurance laws for the country’s sizeable expatriate workforce were first introduced in 2008, the concept quickly spread on to domestic employees, and medical insurance has fast become the biggest line of insurance business throughout the Kingdom. Overall, the Saudi Arabian insurance sector is looking to take on a more significant role in the national economy and today enjoys a greater capital position as more local businesses and individuals become aware of and recognize the value of having adequate insurance coverage.
Compared to other emerging insurance markets in the region, regulatory oversight in the Saudi Arabia insurance industry has become moderately strong, with adequate transparency and corporate governance in force, and this is listed by S&P as a neutral to positive factor in the country’s overall insurance risk assessment. The Saudi Arabian Monetary Agency (SAMA) is responsible for regulating the Kingdom’s insurance sector and has been working with other government and industrial agencies to proactively develop and modernize the domestic insurance trade. S&P notes that the Saudi insurance market underwent a significant change in 2008, when a raft of new regulations were introduced by royal decree that produced some considerable administrative, economic, and operational hurdles to establishing new insurance companies in the Kingdom. SAMA has gone on to enforce these new requirements, which include quarterly reporting, independent board members, public listings, operation licences and regular product approvals. While some of these requirements, especially local office and Saudi national staffing quotas, have proven particularly burdensome, overall many feel that this new framework has provided some order to the market, improved consumer protection, and prohibited anticompetitive behaviour, such as dropping rates.
These updated regulatory processes have also, according to S&P, worked to erect higher barriers to entry in the Saudi insurance market and have perhaps mitigated the competitive pressures currently facing the 33 insurers already operating within a limited marketplace. Because the Kingdom’s lucrative energy business risks remain under a state-owned monopoly domiciled in Bermuda, most of the insurance companies in Saudi Arabia are competing across the same few profitable lines of business. While this certainly drives prices down for prospective customers, it also impacts company profitability prospects based on inadequate pricing going forward. S&P however expect that the pressure caused by overcrowding should ease as the Kingdom’s insurance market grows in both size and sophistication. “With more profitable business available, market participants will be able to expand organically without taking market share from their competitors,” S&P stated.
Despite these impressive strides, the Saudi Arabian insurance sector’s institutional framework has yet to be truly tested under significant stress. The individual insurance players in the market still have much to do in order to capitalize on their potential and realize premium levels similar to those in more developed markets. S&P found that in comparison to many Western insurance companies, Saudi insurers have held a disproportionate amount of capital given the amount of premium they currently write and have tended to focus more on achieving a return on equity (ROE) through underwriting profits alone. The investment strategies for these domestic insurers have been more conservative and, according to S&P, have contributed little to the industry overall sound profitability so far. As competition in the Kingdom increases through 2012 and beyond, S&P anticipate that it will become harder for domestic companies to maintain their market share with underwriting discipline. More profound investment strategies and innovation will surely need to be taken by these companies to tap into Saudi Arabia’s still largely unpenetrated insurance market.
Another issue Saudi insurance companies must contend with now is persistently low global interest rates, and how these low borrowing costs affect their market in particular. Because these insurers operate in an Islamic country adhering to Shariah law, they are all subject to a ‘zakat’ tax on investments. In Saudi Arabia, zakat is a flat-rate 2.5 tax on cash holdings and, according to S&P estimates, exceeded the average investment return for domestic insurers by SR30 million for year-end 2010. “Thus, for Shariah-compliant insurers, the obligation to pay zakat tends to limit the underlying ability of earnings to enhance capitalization…until interest rates rise from their current low levels, Saudi insurers must make an underwriting profit to break even,” Standard & Poor’s reported. When underwriting earnings or investment returns for these companies begin to increase, zakat will then constitute a decreasing share of profits.
Overall, S&P marked the insurance penetration and profitability trends in Saudi Arabia as positive. According to data released by the SAMA last year, the Kingdom’s insurance market grew by 12.4 percent in 2010, passing SAR 16.4 Billion (US$ 4.4 Billion) in gross written premiums. During this period the domestic insurance industry was also able to improve its underwriting performance regarding payouts, with estimated claims processed dropping to US$1.25 billion in 2010 from US$1.54 billion in 2009. This has allowed some domestic insurers to recapitalize and build up reserves. These double-digit growth indicators have helped push the Saudi insurance sector’s overall contribution to around 1 percent of national GDP, double the 0.53 percent reported in 2006, which is remarkable considering that the penetration rate for non-life and life insurance in Saudi Arabia, at 1.0 percent and 0.1 percent, remains amongst the lowest in the region, with a modest average premium per capita of roughly SAR 600 (US$ 160). These low insurance penetration and premium levels will likely soon improve of course, as more Saudi citizens become of aware of the value of private coverage and the local insurance sector evolves to more adequately promote insurance to meet their citizens’ demands for protection against risk. “While insurance penetration remains low as a percentage of GDP, it is growing fast and it is expected that as the economy grows, so will the insurance sector,” S&P concluded.
Ratings Company Mentioned
Standard & Poor’s
Standard & Poor’s (commonly referred to as S&P) is a business branch of publishing house McGraw-Hill. Operating out of 20 countries, S&P provides the investment community with independent credit ratings on important financial vehicles such as stocks, municipal bonds, corporate bonds and mutual funds. In addition to its risk management, investment research and credit rating services, Standard & Poor’s is known for its indexes, in particular the S&P 500 index.
Dec
8
Kuwait Insurance Market Progress
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A new report released this week by global market research firm Business Monitor International (BMI) has provided some insight into recent developments involving the Kuwait insurance industry.
While the insurance industry in Kuwait has grown considerably over the past decade, with gross premiums written expanding by about 11.9 percent annually since 1999, there is still much work to be done. Premiums currently amount to less than 1 percent of GDP in Kuwait, among the lowest in the region. This development has attracted multiple new players to the market and improved the overall competitive landscape of the industry. The total number of insurance companies in Kuwait now stands at 31, with 20 local Kuwaiti companies, 7 Arabian companies and 4 foreign insurers. Similar to other Gulf Cooperation Council (GCC) countries, the insurance market in Kuwait has been dominated by the general insurance sector, which has been driven by the increase in oil prices and government infrastructure development plans. In addition, a law that mandates that local drivers acquire motor insurance has led to the growth of non-life insurance premiums in personal lines.
The Kuwait Insurance Report asserts that while country’s insurance sector will continue to grow overall, this will be due the continued expansion of the economy and population, and not from any particular developments, innovation, or upswing of demand in the local insurance market. By most measurements, the study found that the Kuwait insurance sector will remain stagnant, in comparison to neighboring markets, through the next decade and serves as an example of a country where the prospects for sustained premium growth appear brighter than the reality at present. “There are no obvious catalysts for development of non-life penetration or life density,” BMI explains, adding that several industry insiders are beginning to reduce their exposure to the local insurance sector. Widespread social unrest has also brought about a decline in investor confidence throughout much of the region. This decline in foreign investment has however been somewhat offset in oil producing nations like Kuwait by the continued rise in oil prices.
According to the most recent data published by listed Kuwait insurance companies, the industry’s overall growth rate in gross written premiums has slowed down quite significantly during the second half of 2011, especially in relation to last year’s performance. In 2010, Kuwait insurers reported that gross premiums rose by around 22 percent over 2009’s figures, while net premiums during this period increased by a less significant rate of 14 percent. Through the first half of 2011, by contrast, gross premiums have only appeared to grow by around 3 percent. According to BMI’s prospectus, only one listed insurance company, Al-Ahleia, has been able to post double-digit growth in gross written premiums so far this year. Despite this slowdown in business however, Kuwaiti insurers have generally remained well capitalized in 2011, and have been able to maintain sound investment earnings despite persistent global financial market volatility. BMI notes that in Kuwait, as in much of the Middle East and North Africa, local insurers are highly dependent on reinsurance companies to absorb their risks. Because of this, net premiums usually report to be a lot lower than gross premiums.
Looking at corporate transactions though 2010, BMI observed how the country’s business community have reacted to the market downturn. Gulf Insurance, Kuwait’s largest insurance company with over half of all local premiums written, has spent the last few years steadily increasing its investments in insurance subsidiaries in other Middle East and North African countries. KIPCO Group, Gulf Insurance’s largest investor, meanwhile sold almost half of its holding to a Canadian firm, Fairfax Financial Holdings, in September 2010 for KWD60 million (US$209million). “Neither the leading insurance company nor its dominant shareholder appear to see the opportunities in the local insurance sector as being more attractive than the opportunities that are available elsewhere,” BMI surmised.
Kuwait’s insurance sector performance reflects the generally muted perception and demand for protection products in the country. For many Kuwaiti nationals, the country’s pre-existing social security system appears generous enough to meet their needs and see no need to take out further insurance coverage. BMI notes that in the country’s general insurance market, overall penetration rates have remained stagnant for years, with life insurance only posting moderate gains during the same period. While these low insurance density and penetration rates are certainly an issue throughout the region, unlike other Gulf Cooperation Council (GCC) countries, there appears to be no impending governmental or societal reforms in Kuwait which could push the insurance industry forward. The country’s parliament, now dissolved, had yet to pass updated laws designed to lift the insurance sector closer to international standards, including much needed solvency requirements. This inaction has held the industry back and left potentially important sectors like bancassurance under the control of the Central Bank of Kuwait. Moves like this are a stark contrast to what is occuring in neighboring countries like Qatar and the UAE, which have both been actively promoting and liberalizing the development of their respective financial services sector. Going forward, comprehensive legislative reform will be needed to bring about the more robust regulation and oversight required to make insurance a much more prominent part of the country’s overall financial services landscape.
One insurance line that has been able to deliver consistent growth in Kuwait over the past few lean years has been takaful, which is a form of insurance that is designed to act within the tenets of sharia Islamic law. As is the case in many other GCC countries, takaful services now account for about a fifth of all Kuwait’s insurance premiums. BMI notes however that while Kuwait is home to several substantial sharia compliant financial institutions, the country’s takaful operators are not yet developed sufficiently to truly capitalize on this market. There are, according to government data, 12 active takaful companies that account for about 18-20 percent of total premiums written in Kuwait. Despite an increase in awareness and popularity of Islamic financial products, it is not evident that Kuwait’s takaful operators are in fact growing any faster than the rest of the country’s insurance sector as a whole. “Most of the takaful operators are tiny by any standard,” BMI noted.
The Gulf’s insurance industry overall is entering an important transitional period. Recent economic developments, combined with the growth of a large young population that are more conscious about the concept of insurance, have helped create sizeable business opportunities for the region’s insurance companies. Despite their small and relatively affluent population base, the insurance penetration and density level in the region has remained lower than that of their global peers from both emerging and mature market economies. With the help of the international insurance industry this could soon change as more Emirati citizens see the value of greater insurance protection.
Nov
29
Arab Spring Could Affect Regional Insurance Markets
Filed Under Middle East, UAE Insurance | 1 Comment
The ongoing civil strife and revolutions occurring throughout the Middle East and North Africa could have a negative impact on the further development of insurance markets in the region, according to a new special report published this week by AM Best.
2011 will forever be known as a year of mass social unrest and political turmoil in the Middle East and North Africa (MENA) region, where revolutions in certain countries have not only taken a considerable human toll on local populations but have also affected the region’s financial risk systems and overall business environments for potentially years to come. In ‘Protests Alter Forecasts for Premium Growth in MENA,’ worldwide insurance information and credit ratings agency AM Best examines the financial impact of the Arab Spring protest movement, country by country, and how it has altered the international insurance industry’s prospects in the region.
In general, periods of sociopolitical unrest and upheaval will pose considerable problems to a nation’s insurance industry, disrupting business patterns and affecting liquidity, according to AM Best. For the insurers themselves, premium levels can often stagnate due to business days lost due to unrest and other prolonged inabilities to collect on policies. In addition, while claims directly resulting from revolution and civil war are typically excluded, the incidence rates of claims overall can be higher in the aftermath and firms will have to find ways to absorb these losses. Moreover, if wide scale changes to a country’s government occur, insurance regulations could follow suit and the performance of previously prominent state-backed companies could be affected. Alternatively, the rating agency noted, certain business lines can in fact benefit from these tumultuous times, with premium levels for cargo and marine cover due to rise in tow with expected oil prices, as well as reinsurance opportunities arising from reconstruction efforts and government infrastructure spending.
Overall, AM Best reiterates that premium growth will continue to be closely linked to economic activity. “Specifically, a country’s growth in inflation-adjusted insurance premiums is determined, at least partially, by the overall level of real economic activity in that country. Nominal gross domestic product growth historically is highly correlated with insurance premium growth,” the ratings agency noted. Thus political turbulence which fosters business uncertainty could affect the development of the region’s insurance markets going forward.
Although the political situations in several MENA countries are still far from resolved, AM Best was able to use the most recently revised economic growth data provided by the International Monetary Fund (IMF) to forecast how the region’s insurers may expect to perform in the near future. In September, the IMF downgraded the economic growth projections of 8 MENA region countries, including Algeria, Bahrain, Egypt, Syria and Tunisia, and raised the forecast for 7 others. Although Syria is the only country expected to slip into a formal recession, the IMF noted that the unrest is expected to negatively impact the economies of many MENA nations in 2011, with growth rates generally returning to their original pre-crisis path by around 2013 or 2014. The IMF held the potential long-term disruptions in key business sectors of MENA economies, chiefly, tourism, private financing (particularly foreign direct investment) and the oil industry, accountable for the reductions in GDP projections. Tourism and investment activity, in particular, are highly dependent on consumer and investor confidence, and have been shaken by the pervasive turbulence of the Arab Spring. Equity markets across the MENA region have been down 16 percent on average since the start of 2011, ranging from the full rebound in the Qatar exchange to a massive 41 percent drop on the Egyptian exchange.
Using the IMF’s updated forecast, AM Best found that the Arab Spring protests will affect the insurance industries of each country in different ways, although the projected impact on premiums overall in the region is not expected to be too severe, owing primarily to the relative immaturity of the MENA insurance sector in general. According to AM Best’s calculations, the impact the widespread unrest will have on markets ranges from Syria’s projected insurance premiums in 2015 being around 14 percent lower than they would have been before the protests, up to Turkey’s projected premiums in 2015 being in fact 1 percent higher. Of the 16 countries surveyed in the MENA region, 10 are expected to post lower premium growth in the aftermath of the Arab Spring, namely, Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Oman, Qatar, Syria and Tunisia, with Egypt and Syria experiencing the largest expected declines in growth due to unrest. Relative to country risk metrics, with the exception of Tunisia, all of these markets where the impact from the Arab Spring is judged greatest were already classified in AM Best’s highest country risk tier. Meanwhile, 5 MENA countries are projected to remain unaffected or experience modest gains, with more than US$2 billion in projected premiums in 2015. These countries are Israel, Morocco, Saudi Arabia, Turkey, and the UAE.
While these findings could indicate a significant shift in the MENA insurance industry, premium levels for the whole region are projected to only be 0.7 percent lower in 2015 than they otherwise would have been without the protests. “Thus, while the overall effect of the protests in the short-to-medium run is negative, it will be relatively minor on the regional insurance industry,” AM Best noted. The rating agency’s findings leave us with two profound conclusions, one is that political upheaval does not necessarily destroy a domestic insurance industry, and the other is that there is still considerable opportunity for foreign investors to build the insurance trade in the MENA region.
Rating Agency Mentioned
A.M Best
A.M. Best Company was founded in 1899 and is a full-service credit rating organization dedicated to servicing the financial services industries, including the banking and insurance sectors.
Nov
1
Bahrain Insurance Industry On the Rise
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A new report issued by The Central Bank of Bahrain (CBB) in October has detailed the considerable progress the small Gulf country’s insurance sector has made in the past ten years.
In the Insurance Decennial Report 2010, the CBB revealed that the gross premium volume generated in the Bahrain insurance market has increased steadily over the past decade, moving from BD 58.6 million (US$ 155 million) in premiums in 2001 at a compound annual growth rate (CAGR) of around 15 percent to BD 210.5 million (US$ 558 million) in 2010. The CBB, who serve as Bahrain’s chief insurance and financial services oversight body, attribute the kingdom’s sustained industry development to favorable economic indicators and an improved regulatory framework, consistent with the best international standards.
Bahrain’s insurance market now features 27 domestically incorporated companies and 11 foreign-backed ventures (subsidiaries of multinational insurers), who each compete across insurance, reinsurance, takaful, retakaful and captive business lines in the kingdom. The CBB study showed that the combined asset value of these insurance firms has grown by 19 percent annually over the past five years, and now stands at a considerable BD 1.36 billion (US$3.62 billion). This solid industry-wide performance has enabled the insurance sector to take on greater socioeconomic responsibility in Bahrain, with local firms employing 1,726 people in 2010 (60 percent of whom were Bahraini nationals) compared to just 854 in 2001. According to CBB Executive Director, Abdul Rahman Al Baker, the continued development of the country’s insurance market will create greater opportunities for both local and international insurers. “The insurance sector in Bahrain holds tremendous promise for growth, as demonstrated by the industry’s strong performance not only during 2010 but over the last decade. Bahrain is fast becoming a hub for major regional and international reinsurance and retakaful firms as evidenced by the increasing number of such firms getting licensed in the Kingdom,” said Mr. Al Baker.
The expansion of the insurance business in Bahrain has corresponded with the overall growth in the kingdom’s economy, with national GDP growing at a similar 12 percent CAGR from 2001 to 2010. As this has happened, insurance penetration has grown in the Kingdom from 1.95 percent of GDP in 2001 to 2.55 percent in 2010. In a similar fashion, insurance density, which measures average per capita insurance premium expenditure, has increased with a CAGR of 7.5 percent over the same period. According to IMF projections, Bahrain’s GDP will expand 16.9 percent during 2011 and at a CAGR of 6 percent from 2012–15.
According to the Central Bank’s report, the rise in medical insurance participation has been a key contributor towards the insurance industry’s overall growth and development in the Kingdom of Bahrain over the past ten years. During this period, health lines have been the fastest growing traditional insurance business sector by far, with gross premium volume moving from BD 1.76 million (US$4.68 million) in 2001 to BD 31.75 million (US$84.44 million) in 2010 at a staggering 38 percent compound annual growth rate. By 2010, health insurance business comprised about 15 percent of the total premiums underwritten in Bahrain’s insurance market. The sale of long-term life insurance and savings products has also seen considerable progress over the past decade, with combined premiums rising from BD 13 million (US$34.5 million) in 2001 to BD 51.36 million (US$ 136 million) in 2010, and now comprising almost a quarter of the gross premiums written in the kingdom. As public awareness about the importance of health and life insurance planning improves, in conjunction with innovative product development by domestic insurers, premium levels will continue to rise.
The CCB study shows that motor insurance has remained the dominant business line in Bahrain, accounting for over 27 percent of the market with over BD 57.47 million (US$ 152 million) in premiums for 2010. Fire, Property & Liability insurance meanwhile represents 17 percent of the kingdom’s total protection market, with BD 35.66 million (US$ 95 million) worth of premiums in 2010. As per capita incomes and lifestyle expectations across the Gulf region continue to rise, more residents are realizing the necessity of protecting themselves and are demanding more insurance and investment plans for their growing families and property portfolios.
One final growth driver of further insurance industry success in Bahrain will be the performance of the Kingdom’s takaful sector. Takaful, or Sharia-compliant insurance, has emerged as a powerful niche securities market in the region. Takaful products are mutually beneficial coverage policies that cater specifically to Middle Eastern and Asian Islamic communities. The takaful insurance industry is projected by industry analysts to grow at 15 percent annually over the next 5 years and generate more than US$7 billion in premium income worldwide. In Bahrain, the takaful industry has already demonstrated considerable growth potential. Over the past ten years, gross contributions have gone up from BD 1.89 million (US$5 million) in 2001 to BD 38.55 million (US$102.53 million) in 2010, demonstrating a CAGR of almost 40 percent for the period.
While Bahrain’s insurance industry is a small, tightly regulated market, it is expected to witness sizeable growth in the near future. According to the recent GCC Insurance Industry report issued by Alpen Capital, the country’s insurance market is forecast to expand by 16 percent from 2011-15. The kingdom is developing a mandatory national health insurance policy for all expatriates, which when finalized in 2013 could play a substantial role in driving the growth of the domestic insurance sector. However, while the penetration rate for both life and non-life insurance policies in Bahrain is high in comparison to other GCC countries, at 0.8 and 1.9 percent respectively, much work still needs to be done to match global peers from other emerging and mature market economies. Overall there is tremendous potential for growth within the Gulf insurance industry due to relatively low insurance penetration levels, positive demographic/economic trends and pronounced infrastructure development occurring throughout the region.
Sep
23
AXA partners with Wasilah in Saudi Arabia
Filed Under AXA PPP, Middle East | 1 Comment
This week, Europe’s second largest insurer AXA selected Wasilah Insurance Agency to be its new business partner in the Kingdom of Saudi Arabia. The deal comes as part of the French insurance giant’s plans to further develop and promote its products in the Gulf region.
On September 20th 2011, AXA Cooperative Insurance Company, the French insurer’s Saudi Arabia-based shareholding company, signed a 10 year renewable agency contract with Wasilah Insurance Agency. Through this partnership, Wasilah has been given exclusive rights to market, distribute and sell all AXA-branded insurance products currently offered in Saudi Arabia.
AXA has been a key player in the Gulf and Middle East for over 60 years, offering a wide range of insurance products and services for corporate and individual clients in the region. In 2008, the company formed a co-operative insurance subsidiary in Saudi Arabia, called AXA Cooperative, and launched their company’s Initial Public Offering, which was over 5 times over-subscribed, in April 2009. Initially licensed to cover only motor and health policies, the insurer received final regulatory approval from The Saudi Arabian Monetary Agency (SAMA) last year to fully carry out its cooperative insurance and reinsurance business in the Kingdom of Saudi Arabia.
AXA’s interest in developing a greater presence in Saudi Arabia is well founded. With a population exceeding 27 million people, Saudi Arabia is the largest market in the GCC, and the insurance sector has developed substantially since the business was first permitted in the 1990s. Driven by strong macroeconomic performance (tied to a global rise in oil prices), rising income levels and positive demographic trends, the Saudi insurance market has grown by double digits for the past 5 years. In 2010, the Kingdom’s insurance sector grew by a further 12.2 percent, passing SAR 16.4 Billion (US$ 4.4 Billion) in gross insurance premium. This has all happened while the Kingdom’s non-life and life insurance penetration, at 1.0 percent and 0.1 percent, remain amongst the lowest in the region.
According to a recent report by Alpen Capital, Saudi Arabia’s insurance sector could reach US$9.24 billion in total written premiums by 2015 at an 18 percent combined annual growth rate. Due to an ageing population and regulatory initiatives, Saudi Arabia will be the only GCC market in which sales of new life insurance policies are expected to grow faster than that of non-life products. While the main business lines in the Saudi insurance industry have been health insurance and motor insurance retail cover, takaful insurance also has a significant presence in the Kingdom and their continued development will improve awareness and acceptance towards other lines of insurance in the region. Increased participation from the international private sector is also expected to yield additional positive returns.
This anticipated surge in demand for international insurance expertise in Saudi Arabia has pushed AXA to both improve upon their product portfolio in the region and seek out local business partners to enhance their immediate distribution platform. AXA’s new policies in Saudi Arabia will primarily cover retail products, but also will cater to the Kingdom’s growing SME sector. The new lines of business will include motor, property, marine and medical insurance as well as other protection options.
Through their new tie-in with Wasilah, AXA’s products will initially be sold through the agency’s headquarters in Riyadh. Within the next three years this network will be expanded significantly across the Kingdom, with around ten more agencies scheduled to be opened in Jeddah, Riyadh and Dammam. Wasilah’s head office in Riyadh will be responsible for supporting all new branches in addition to supervising its overall operations.
Speaking at the signing ceremony, AXA Cooperative Director Jerome Droesch asserted that their new partnership with Wasilah would give AXA the necessary edge to capitalize on Saudi Arabia’s remarkable market potential and take on the three leading players (Tawuniya, Medgulf and Bupa Arabia) in the retail and SME insurance sectors. “We see tremendous growth coming from KSA. We were very pleased to be granted our insurance license last year. Wasilah Insurance is a fitting partner to promote AXA Cooperative Insurance’s products and services in the Kingdom and they will be a key contributor towards our gaining dominance in the Personal Lines and SME line of business. It should represent as much as 15 percent of AXA Cooperative premiums in 3 years,” Droesch said.
According to Business Monitor International estimates, the Saudi population is one of the fastest growing in the world and is estimated to double by 2023. This substantial increase in the population not only increases the probability of insurance policies being taken out but also the number of Saudi locals able to work in the industry. Droesch explained that AXA would work hard to ensure the development of their insurance business contributed to the overall economic growth of Saudi Arabia. “This partnership shows that AXA will continue to invest in the region and our focus will be to seize the huge potential this market has to offer. We will leverage our international expertise and adapt our services and offerings to suit the local Saudi clientele. We will also continue investing in our employees and will use the large pool of well educated Saudi nationals as a prime source of recruitment and expertise,” Droesch remarked.
Khalid Al Rubaian, Board Member and Owner of Wasilah Insurance Agency, welcomed AXA’s involvement with his agency. Wasilah is a newly licensed agent but staffed with experienced insurance industry professionals, and with the right product portfolio could excel in the Saudi market.“I’m sure with AXA international expertise and the experience and knowledge of the Wasilah Board and Management supported by insurance matter experts with locally based expertise of international quality and standards; we will make a difference in the industry,” Al Rubaian.
AXA Cooperative Managing Director Paul Adamson, concluded the event, saying that their upcoming partnership with Wasilah brought them one step closer to fulfilling their overall commitment to expand AXA’s operations throughout the Middle East and match the evolving needs of their international clients. “Our customers will now be able to access us quicker and more easily…We trust that this reputation will carry us forward as we continue to grow and introduce new products to the kingdom,” Adamson said.
Insurance Companies Mentioned
AXA
AXA Group is a worldwide leader in Financial Services. Headquartered in Paris, the AXA Group companies are engaged in life insurance, health insurance and asset management services among others. AXA’s operations are diverse geographically, with major operations in Europe, North America and the Asia/Pacific area.
Wasilah Insurance Agency
Wasilah Insurance Agency is a newly licensed insurance agency, providing multiple types of coverage options in the Kingdom of Saudi Arabia. The headquarters are based in Riyadh and additional 2 regional offices are scheduled to open in Jeddah and Dammam in 2012.
Sep
14
This week, MetLife Alico announced a new partnership with Mashreq Bank, one of the MENA region’s leading financial institutions, to provide new life insurance products and other protection options through their facilities in Bahrain.
Bahrain’s insurance industry covers a small, tightly regulated market that is expected to witness sizeable growth in the near future. According to the recent GCC Insurance Industry report issued by Alpen Capital, the country’s insurance market is forecast to expand by 16 percent from 2011-15. The kingdom is developing a mandatory national health insurance policy for all expatriates, which when finalized in 2013 could play a substantial role in driving the growth of the domestic insurance sector. However, while the penetration rate for both life and non-life insurance policies in Bahrain is high in comparison to other GCC countries, at 0.8 and 1.9 percent respectively, much work still needs to be done to match global peers from other emerging and mature market economies. Unlike most other countries in the region, Bahrain’s financial sector is dominated by nationals and thus has no native citizen employment quotas for business. This, Alpen Capital notes, continues to give Bahrain a competitive advantage in attracting business from foreign insurers.
The move announced this week will see MetLife Alico and Mashreq pool their resources to help the Bahrain insurance market realize its considerable potential. Iqbal Khanyari, Mashreq’s Bahrain country head, explained at a press briefing on Wednesday that the demand for protection and investment services had increased in the country and that this business deal would give both parties the necessary assets to address the residents of Bahrain’s mounting insurance needs. “In these challenging times, it is vital to demonstrate our commitment in addressing our customer’s financial well-being objectives. We believe MetLife Alico’s solutions together with Mashreq Bahrain’s wealth management strategy will meet this requirement,” Khanyari told reporters, adding that “with this agreement, we will now be in a robust position to be a one-stop-shop for our customers’ protection needs.”
MetLife Alico has considerable experience operating in the region, and this is what made the partnership attractive to Mashreq Bank. MetLife Alico was the first private company to be granted an insurance license in Bahrain and has operated in the country since 1961. The insurer is now one of the leading companies in the local market, with over 13,000 customers, 50 dedicated agents and a network of medical providers and banking partners. Iqbal Khanyari further commented that the insurer’s positive reputation and extensive product portfolio made them a particularly valued business partner for Mashreq Bank. “We have chosen MetLife Alico as they are one of the best providers in the region with managed care capabilities and a wide variety of tailor-made plans as part of customers’ wealth management requirements.”
Alex Bromley, MetLife Alico’s Country Manager for Bahrain, Oman, Qatar and Kuwait, returned the compliment, saying that a partnership with Mashreq’s branch in Bahrain would enable them to further develop their business in the country and throughout the rest of the Gulf region. “We, at MetLife Alico, are honored to collaborate with Mashreq Bahrain which is one the most reputable banks in the region. Expanding our existing successful collaboration in UAE and Qatar helps us further strengthen our reach and distribution in the emerging Bahraini market.”
With per capita income and lifestyle expectations rising, Gulf residents are demanding more insurance and investment plans for their growing families and properties. MetLife Alico and other international insurers have been working hard with local institutions to address these concerns and are developing new insurance products catered to these emerging market clientele. This partnership has followed a similar deal struck by MetLife Alico in Qatar and other moves made by international insurers in the Gulf already this summer, including SEIB Insurance’s new contract with Qatar Telecom, the AXA Gulf global health insurance plan ‘Now Health International’, and Agility GHS’ partnership with the Dubai Islamic Insurance & Reinsurance Co.
For the MetLife parent company, this deal to further develop their operations in Bahrain’s insurance market is but the latest move the leading US life insurer has made to expand its international distribution platform, following its US$15.5 billion purchase of American Life Insurance Company (ALICO) from AIG in 2010. The acquisition of Alico has presented MetLife with greater access to emerging Asian, European and Latin American insurance markets. MetLife have been able to demonstrate success from this expansion plan already. The company’s international segment reported operating earnings had increased by US$507 million from US$142 million in the same period a year ago. This influx of new international business, led by the ALICO deal, has helped MetLife’s premiums grow at 41.2 percent year over year to US$9.3 billion. As the global economic order subtly changes in the wake of the 2007-2008 financial crisis, multinational insurers such as MetLife have found value in re-positioning their activities to ensure that they have greater access to the emerging insurance markets that are now providing many global firms with the most profound sales and earnings growth opportunities
Companies Mentioned
ALICO
The American Life Insurance Company, known as Alico, provides a broad, innovative range of insurance and savings products for individual customers, corporate customers and high net worth clients. Their products include; health insurance, life insurance, savings plans, accident insurance, retirement planning and travel insurance among others services.
Mashreq
Mashreq is one of the UAE’s leading financial institutions. Mashreq provides global mutual funds, insurance products, treasury products and fixed income securities. Founded in 1967 as then the Bank of Oman, the bank has played a pioneering role in the regional industry, particularly in the retail banking sector.
MetLife Inc.
Possessing over 140 years of insurance expertise, MetLife aims to be an innovator in the field of international Life insurance. Globally, MetLife is able to offer its clients accident and health insurance, life insurance, disability income protection, and retirement and savings products.
Aug
30
Middle East Insurance Slowdown Sees Development of New Products
Filed Under Expat Insurance, Insurance Company, Middle East, Reinsurance, UAE Insurance, general insurance | 1 Comment
A number of financial reports released by Qatari insurance companies on Monday indicate that the country’s insurance sector may be poised to experience a significant slowdown. Five Qatari insurance companies, operating mainly in the non-life insurance market, have indicated that the sector’s total net profits have risen by only 2 percent during 2011, compared to 9 percent for the same period in 2010.
The companies, which include Qatar Islamic Insurance, Qatar General Insurance and Reinsurance, Al Khaleej Takaful, Qatar Insurance, and Doha Insurance, saw the sector’s net profit for January – June 2011 reach QR 545.96 million (US$ 149.91 million), compared to the QR 537.11 million (US$ 147.48 million) in profits seen for the same reporting period in 2010. The data on the general profitability of these five Qatari insurance companies was released by Qatar Exchange data.
One of the primary reasons cited by the insurers with regards to the lower than expected profits in the first half of 2011 is due to the rise in premiums yielded to reinsurance companies. Reinsurance premium yielding has risen by 8 percent for Qatar’s insurance companies in 2011, with three companies actually yielding more than 55 percent of total written premiums to reinsurers. With the levels of premiums being yielded to reinsurers outstripping the total growth in premium revenue for the market, profits have inevitably come in at lower than expected levels.
Profit growth for the first half of 2011 for the five companies, compared to the same period in 2010, stood at:
Qatar Islamic Insurance: 1.83 percent growth in 2011, up from 0.43 percent in 2010.
Qatar General Insurance and Reinsurance: 1.83 percent growth in 2011, up from -7.31 percent in 2010.
Al Khaleej Takaful: 11.29 percent growth in 2011, down from 46.85 percent in 2010.
Qatar Insurance: 10.74 percent growth in 2011, down from 65.77 percent in 2010.
Doha Insurance: -8.80 percent growth in 2011, down from 60.55 percent in 2010.
While the slowdown of the non-life insurance sector in Qatar does not pose major concerns at present, it has highlighted the need to create innovative policies with which to cover underserved segments of the Middle Eastern insurance market.
One company taking notice from the Qatari slowdown is the Dubai Islamic Insurance and Reinsurance Company, also known as Aman, which is headquartered in Dubai, UAE. Aman’s CEO, Hussein Al Meeza, announced the creation of two new types of protection policy which would focus on affording medical cover to Indian expatriates working in the United Arab Emirates.
The Indian Expatriate Medical Insurance plans from Aman are being run in conjunction with ICICI Lombard, one of India’s leading insurance companies. On creating the plans, Hussein Al Meeza said;
“If you check the structure of the population in the UAE and what relation it has with Emiratis, they are our partners; they are our brothers. They are also the people who (are) behind all the work that has been done here. The relationship that we have with the Indian population was not (built) today or yesterday. Also, we have (an agreement) with ICICI Lombard, which is one of the top names in the Indian market.”
Mr Hussein went on to say;
“Europeans already have the culture of insurance. They have very advanced products. We are looking to see where the opportunities are to provide services. We are looking at the Arab world, Pakistanis, Bangladeshis and Filipinos. It needs a background from the countries, because India has a platform for service providers… The Indian (expatriate population) is a big market and there are a lot of opportunities. Also, we got the right partner for the products.”
The policies, named “Rishtey” and “Health on Return,” aims to give Indian expatriates in the UAE a wider choice with regards to their medical cover than they have previously been afforded. The Rishtey plan would see UAE expatriate workers obtain medical insurance cover for their families in India, while the Health on Return policy would provide health insurance protection to those same expatriate workers in the event that they return to India for a short stay. Additionally, the Health on Return plan also offers the expatriate Indian workers the option of having retirement health insurance cover, creating a far more flexible and comprehensive health insurance product than any which currently cater to this niche market segment.
While a slowdown in Qatar’s general insurance market may pose a concern for the region, industry analysts are aware that there exists significant potential with regards to developing ever more unique products for the GCC insurance sector.
Insurance Companies Mentioned
Qatar Islamic Insurance
Founded in 1995, Qatar Islamic Insurance, also known as QIIC, operates a number of lines of insurance coverage. Offering insurance based on Islamic principles QIIC offers coverage for all risks from Aviation to personal protection.
Qatar General Insurance and Reinsurance
Qatar General Insurance and Reinsurance was founded in 1979, and is a Qatari national company. Qatar General Insurance and Reinsurance offers both individual and business insurance products in Qatar.
Al Khaleej Takaful
Founded in 1978, Al Khaleej Takaful operates primarily in the general insurance and reinsurance markets. Covering risks including Property, Engineering, Liability, General Accident, Marine Transit, and Marine Hull, Al Khaleej has proven time and again to be an innovative insurer.
Qatar Insurance Company
Founded in 1964, Qatar Insurance Company, also known as QIC, is Qatar’s oldest insurance provider. Operating a number of personal and business insurance products across the GCC, QIC is one of the most established insurers in Qatar.
Doha Insurance
One of the younger insurance providers in Qatar, Doha Insurance was founded in 2000. Establishing a Takaful products company in 2006, under the name Doha Takaful Insurance, Doha Insurance company offers a range of general insurance products.
Dubai Islamic Insurance and Reinsurance Company
Dubai Islamic Insurance and Reinsurance Company, also known as AMAN, was established in 2002 to provide comprehensive Islamic insurance products to residents of the UAE. Offering Motor, Home, and Medical Islamic insurance products, AMAN is one of the leading insurance providers in the UAE.
Jun
27
Lloyds moves into Saudi Arabia with RFIB
Filed Under Insurance Company, Middle East, UAE Insurance | 4 Comments
RFIB Group, the international Lloyd’s insurance and reinsurance broker, has been approved for an intermediary license by the Saudi Arabian Monetary Agency (SAMA) to commence its insurance and reinsurance operations in the Kingdom of Saudi Arabia.
RFIB had been active in the Saudi Arabia insurance market for nearly three decades, but renewed regulatory efforts initiated by SAMA last year have required all foreign brokers operating in the Kingdom to attain a license.
Upon the successful receipt of the license, RFIB has now established a branch office in the Saudi capitol city, Riyadh. SAMA also required RFIB Group to select a Saudi Arabian business partner to set up its Riyadh unit. The company has partnered with Bassam Al-Dhabaan, which now owns 40 percent of the local business.
This move follows RFIB’s entrance into the Russian market earlier this year, with the establishment of new Moscow-based retail broker Anglo Russian Insurance Broker (AnRu). AnRu operates as both an insurance broker and an agent targeting corporate retail business. AnRu already has several agency contracts signed with leading local insurance companies, and is expected to rapidly develop in 2011, according to RFIB.
At the outset, RFIB’s new Saudi office will handle reinsurance business, but after its first year of operation the company intends to explore further opportunities in more specialized retail insurance businesses. The Saudi subsidiary will be headed by Anthony Harris, a former British Ambassador to the UAE who been working for RFIB in the Middle East since February 2006.
On the establishment of the new RFIB unit, Anthony Harris said in a statement: “RFIB has been handling reinsurance risks from the Saudi market for nearly 30 years, but our new insurance and reinsurance broking license is the final stage in our establishing a domestic presence in this important and growing market and we would like to thank SAMA for their help in working with us to achieve this license.”
RFIB have also appointed Naji Tamimi, a Saudi national previously at local firm Malath Cooperative Insurance & Reinsurance Company, as the new office’s deputy general manager. Currently the RFIB offices have four full-time staff members and will soon look to ramp up recruitment efforts. The company eventually intends to have at least 50 percent of its staff be comprised of Saudi nationals.
Adrian Spooner, RFIB’s managing director in the Middle East, commented on the company’s expansion strategy: “Naji’s appointment as Deputy General Manager has been invaluable in establishing our new office in Riyadh. His long experience in the market and extensive contacts will be crucial in growing our business in the Kingdom. We now intend to seek further recruits from the local market, working closely with our international team in London to aid staff training and development.”
Saudi Arabia’s labor market has become a sensitive political matter in the Kingdom. In the midst of regional unrest and a considerable 10.5 percent unemployment rate, creating job opportunities for Saudi nationals has become a priority. Various schemes are being discussed by the government that will evaluate the employment of native Saudis by private companies and differentiate between those that have achieved high ‘Saudization’ rates, and others who have not; with stricter limits on foreign work-permits a real possibility going forward. Saudi Arabia employs around 8 million expatriate workers, 6 million of whom work in the private sector.
While foreign employees may not necessarily be in demand, outside capital certainly is becoming more welcome in the MENA region. Insurance House, a recently launched Abu Dhabi based insurance company, agreed at a shareholders meeting to raise the limit on foreign ownership of the business to 25 percent of the company’s paid up equity share capital. The move comes just days after Insurance House’s public listing on the Abu Dhabi Securities Exchange (ADX).
Insurance House provides insurance services to Gulf businesses and individuals from its headquarters in Abu Dhabi, and branch offices in Dubai and Sharjah. It has a listed paid-up capital of Dh120 million (US$32.7 million). Last month the insurer raised an additional Dh66 million (US$18 million) as it sold 55 percent of shares to the public. The share issue was available exclusively to UAE nationals at a minimum subscription of 25,000 shares per investor.
Mohammed Alqubaisi, chairman of Insurance House, spoke admirably of the company’s development. “[The IPO] is another milestone for Insurance House. We will always strive for excellence and will endeavor constantly to create value for our existing shareholders. Additionally, we will give an opportunity to foreign investors to participate in our promising venture by building a successful and established relation with them,” he said in a statement.
The Insurance House’s decision comes after a similar vote last week by First Gulf Bank, UAE’s second largest bank by market capitalization, to increase foreign ownership limits from 15 to 25 percent. UAE firms are seeking an upgrade to “emerging-market” status from “frontier market” by international index provider MSCI.
The MSCI cited the UAE’s tight limits on foreign ownership of listed companies as one of the key barriers currently preventing an upgrade to the market’s status. An upgrade to emerging-market status could drive an increase in international investment in companies throughout the Emirates. The limit for foreign ownership of listed companies in the UAE is 49 percent.
At present, non-Gulf foreigners ownership accounts for 8.5 percent of equities listed on the UAE markets, with holdings of Dh12.4 billion (US$3.37 billion). UAE citizens hold around 91 percent of all equities and the remainder is made up by other Gulf nationals.
Opening up further foreign investment opportunities in Gulf companies is expected to continue, according to market analysts. As more firms go public on local indexes they will need to amplify the visibility of their stock and increasing outside ownership limits is an effective way to get more attention.
Companies Mentioned
RFIB
RFIB Group is an international Lloyd’s insurance and reinsurance broker. The company provides insurance for a variety of risks associated with both facilities and personal casualty. In addition, RFIB offers an assortment of reinsurance products; and acts as broker and consultant to other direct and reinsurance brokers. The company’s clients include corporations, banks, insurance and reinsurance companies, captives, groups and individuals. RFIB was founded in 1980 and is based in London, the United Kingdom with branches worldwide.
Insurance House
Insurance House was launched in May 2011. The company provides a wide variety of insurance products and services to businesses, groups and individuals from its headquarters in Abu Dhabi, in addition to branches in Dubai and Sharjah.
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