Where does the GCC insurance market sit since the financial crisis of 2008?
The GCC region is an important insurance market among emerging economies, because of the economic wealth that resides within it. If you look at GCC states, they are all strong energy producers. That huge wealth is creating opportunities in the market, which is allowing governments to put together progressive infrastructures. There are railway lines being built and borders will become more open. If you look at population growth trends, they are all very strong. So, this growing population needs to be serviced by the insurance community and not just in terms of other risks, but medical insurance, which has become a key sector.
What is the regulatory situation in the region? What is the role of rating agencies such as S&P?
There is an opportunity for the regulators to create a more effective insurance market in the region. When you look at GCC states, Saudi Arabia stands out as having an established and effective regulatory system. Bahrain shares the same reputation and Dubai has a strong financial centre. However, in the UAE, the regulatory perspective on the market is still very light. There are concerns within the insurance community as to the effectiveness of the protection provided by regulators. We know that regulators in the UAE made new draft laws in December 2013, but we must wait to see how the industry will respond. From a rating agency’s perspective, we are already in the market and it is our job to work with the community, both at the request of the industry, and policyholders and brokers that depend on them, so we can give coherent opinions on those companies and determine the extent to which they can service their potential liabilities.
S&P recently rated Sharjah, how significant is this to the overall performance of the UAE’s financial markets?
I must give you a big caveat on this one. I am not a sovereign analyst, so I cannot comment specifically on the rating of Sharjah. What I can tell you is that S&P rates sovereign entities in the same way we rate corporate ones. There are no formal financing agreements at a federal level. Abu Dhabi is the obvious treasury house and I’m not sure if there is a financial mechanism for the UAE to help provide support to other emirates. Sharjah is an emirate that has its own sovereign infrastructure and the rating we delivered recognised it as a stand-alone entity, with its own income streams, expense base and economic drivers.
What trends should we look out for in 2014?
I think, in financial terms, we can continue to see a relatively strong premium growth. The main driver is the economic well-being that is felt across the UAE and the GCC region. We see Qatar preparing for the World Cup 2022 and Dubai getting ready to host Expo 2020 – all of this should help put the infrastructure plans together. As we see global economies start to recover, particularly Europe and North America, this will filter through into the Gulf states.
Will Expo 2020 translate into growth for the trade credit segment?
The answer has to be yes, trade credit and the internationalisation of Gulf states mean that there is an increased interest in protection. It is here already and is just one of those areas that the community needs to recognise as an activity that can be serviced.