Growing population in the Arabian Gulf is a huge opportunity for the insurance sector in the region, says S&P director of financial institutions, Kevin Willis.
In an exclusive interview to Policy, TRENDS sister publication, Kevin Willis discussed the current state of the UAE insurance market, and what to expect in the months ahead.
He also talks about the Qatar’s world cup preparations, and Dubai’s recent Expo win as examples of where growth from infrastructural development will come from.
Where does the GCC insurance market sit since the financial crisis of 2008?
The GCC is an important insurance market in the emerging market world, because of the inherited economic wealth that resides within the market place. If you look at the states in the GCC, they are all strong energy producers.
That huge wealth is creating opportunities in the market, which is allowing the governments to put together progressive infrastructures. There are railway lines being built and the borders will become more open. If you look at population growth trends, they are all very strong. So there is a growing population that needs to be serviced by the insurance community. Not just in terms of the other risks, but medical insurance, which has become a key sector.
What is the regulatory situation in the region? And 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 the 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 center. But 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 from the regulators.
We know that the regulator here in the UAE has made new draft laws in December 2013, which we must wait to see how the industry will respond. From a rating agency 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 the people that depend on them; policyholder and brokers. To 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 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 that 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 that there is a financial mechanism for the UAE to help provide support to other Emirates. So Sharjah is an Emirate that has its own sovereign infrastructure and the rating we delivered recognised that it is a own stand –alone entity, with its own income streams, expense base and economic drivers that we can form an opinion on.
Trends in the year ahead…
I think in financial terms we can continue to see relatively strong premium growth. There are two drivers, the economic well being that is felt across the UAE and the GCC. We see Qatar preparing for the world cup – the expo in Dubai, and all this should help put all the infrastructure plans together. And as we see the global economies start to recover, particularly Europe and N.America, this will filter through into the gulf states.
Expo 2020 – will it translate into growth for the trade credit segment?
The answer has to be yes, trade credit and the internationalization of the Gulf States means that there is an increased interest in trade credit protection. It is here already and just one of those areas that the community needs to recognize is an activity that can be serviced.