For over 300 years, London has been at the centre of the global insurance market. Key to its success was creating a cluster of underwriters and brokers, all within a few hundred metres of one another. As London continued to grow as a global trade hub, the Lloyd’s market innovated by writing a greater variety of more specialised risks. And so, London’s insurance market flourished.
Today, international trade and finance are rapidly changing, with new hubs and new corridors set to reshape the global economy. For instance, China’s One Belt and One Road (OBOR) initiative could, according to McKinsey, impact about 65% of the world’s population, about one-third of the world’s GDP, and about 25% of all goods and services traded around the world.
Emerging insurance hubs like the Dubai International Financial Centre (DIFC) are not going to replace London but there is a clear role for them in providing specific insurance coverage in specific markets – particularly where they have a strategic advantage in terms of geographic location, as is the case with Dubai, which is centrally positioned along the OBOR routes. Our region, the Middle East, Africa and South Asia (MEASA), also boasts strong fundamentals – it is a $7.4 trillion market with a population of about three billion people. This market is also significantly underinsured – in the Middle East, insurance penetration is only around 1.5%-2%, so there is significant room for growth.
When I think about where DIFC is today and where it wants to be as a global insurance hub, I see many similarities in how London established itself a hub all those centuries ago. Firstly, we too at DIFC recognise the importance of creating clusters. DIFC is the largest cluster of financial services firms in the MEASA region. The insurance sector is a key part of that cluster, currently comprising about a quarter of our regulated companies.
Meanwhile, Dubai is also asserting its status as a global trade hub – in 2015, Dubai’s overall non-oil trade reached $350bn. And Dubai’s biggest trading partners – China followed by India.
Finally, innovation is also something at the heart of the DIFC financial services proposition. However, the innovation we are focused on today is slightly different to the specialist insurance platform London has developed over the last 300 years. At DIFC, we have been actively developing our FinTech ecosystem through initiatives such as FinTech Hive, a first-of-its-kind accelerator in the region that connects cutting edge technology with traditional financial services firms. We also have a hugely supportive regulator, the Dubai Financial Services Authority (DFSA), which has put in place regulatory infrastructure that allows qualifying FinTech firms to develop and test their concepts from within the DIFC, without being subject to the regulatory requirements that normally apply to regulated firms.
We at DIFC are not only looking to markets such as Lloyd’s to better understand how to build a successful insurance market but we are also eager to work with them to ensure we are all focused on honing our own competitive advantages. For us, growing economies, evolving demographics and increasing regulation mean that the MEASA region is on the brink of a demand boom for insurance products – and DIFC provides an ideal hub for regional and international firms to make a play in that market.
This article was first published in Global Reinsurance magazine .