Do you have a sense of how much growth potential reinsurance has in the wider GCC region?
According to the S&P Global Ratings GCC Insurers in 2022 Report & Swiss RE sigma No 3/2021, the GCC’s total GWP stands at USD 28bn with the UAE being largest insurance market in the GCC. The country-specific trends highlight that the year-on-year growth is stable across Saudi Arabia, Kuwait, Qatar, Oman, and Bahrain. The growth emanates from the mandatory line (health), as well as P&C insurance. The improvement was evident in 2021 and based on market feedback, it was a positive year of growth that is anticipated to be replicated for next coming years.
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DIFC also conducted an independent market survey during DWIC to which our respondents signified their strong confidence in the whole MEASA market over the next 12 months. The lines of business where they see growth opportunities are cyber, liability, property and energy. Owing to the pandemic, the natural transition to everything online and the drive to digitize all transactions were fast-tracked. This also means that the cyber risks increased significantly. As an innovation hub, DIFC has also seen significant rise in innovation and tech companies that are changing the dynamics of financial services. With the aspirations and projects these companies are contributing into, there needs to be a serious focus on ensuring they are well-protected for potential losses from malicious cyber-attacks and ransomware. In addition, as DFSA looks into the regulation of Crypto Tokens, cyber presents itself as a huge opportunity for this emerging market.
The opening up of the markets within the GCC and the thriving business activities of the banking sector allows all projects which were stalled during the height of the pandemic and lockdowns to continue within the GCC. The continuous build of physical infrastructure, and commercial and residential properties are opportunities for the reinsurance market in the region. Property underwriting, we expect, would find more opportunities as all these plans continue on.
Sustainable energy is another growth potential for the reinsurance industry. Whereas the region is known for its oil and gas industry, the move to clean, renewable energy using other technologies and infrastructure will also require reinsurance cover and technical support, and this is an area where specialized reinsurers could find new opportunities for growth.
2. What part do you think DIFC might play in being a central hub for reinsurance activity in the region?
DIFC plays a crucial role in being the centre of excellence for reinsurance in the region. Having over 100 Insurance-related companies in DIFC including 84 DFSA-regulated companies, the talent and technical expertise of our centre’s reinsurance market offers well-regulated, international standards of underwriting with strong capacity from well-rated companies across the globe. The DIFC brings these important elements to the region with a regional flair and understanding of the markets’ culture and landscape
The DIFC is also committed to improving talent in the region through the presence of Chartered Insurance Institute in DIFC, as well as collaborative efforts with our own DIFC Insurance Association. We believe that part of our role as a central hub is to help the region mature and educate its people on the relevance of proper risk management.
3. What initiatives has DIFC undertaken to make itself ‘reinsurance friendly’ over the past few years?
We work closely with our own independent risk-based regulatory body, the DFSA through open dialogues. These conversations with the market and DFSA to look into new products has always been a priority to encourage innovation not just in the technical aspect of things but also with new products and licenses. As an example, the ability of DFSA to accept applications for the new Lloyd’s license, Syndicate In A Box (SIAB) helps encourage international benchmarking for regional players. As we speak, we now have one in the pipeline waiting for its full license which we expect to come through in the next coming months. The ability of our regulators to also accept Innovation Testing License (ITL) applications to test new and innovative financial products, services, and business models with Insurance focus is also an encouraging way to attract start-ups in the centre.
The regulatory environment of DIFC is leading in the region and is comparable to other advanced markets in the world. This allows us to bridge the gap between key centres such as London, Zurich and Singapore.
We also have the leading data protection (GDPR-compliant) law in the region and Intellectual Property (IP) law that give our reinsurers the level of comfort to operate in a jurisdiction that is familiar to international players, and encourage them to come up with new products that is designed to meet the region’s needs.
4. What steps is DIFC looking to take to make itself more attractive to reinsurers in future?
DIFC continues to engage with local and regional regulators to ensure alignment and understanding of the retail market’s requirements.
Committing to the promotion of the reinsurance market in the centre through roadshows and event participation in the region and globally, as well as the opportunities that are available in the emerging markets of MEASA, is important to us. Through close work and exchange of ideas with trade associations and channel partners, we spread the word of our DIFC reinsurance market’s capacity and capability to handle risks, be it through facultative or treaty underwriting. The DIFC platform brings the technical expertise closer to its customers and this is what we would like for the reinsurers to utilize and take advantage of. The DIFC draws a lot of cedants and brokers within the GCC, South Asia, Africa and other parts of the Middle East to come and work with DIFC players. This is exactly what we would like for reinsurers to benefit from and enjoy.
Further developing the Captive regime with the regulator and promoting it to regional companies will also present opportunities for reinsurance. As a Captive domicile in the region, DIFC is seeing more and more regional companies exploring Captives and setting up their own for their regional insurance programs. The reinsurance support is crucial for Captives, as well to help indemnify for part or all of the liability assumed by these Captives so capacity is an integral element into this whole piece. The DFSA had recently made adjustments to the Captive regime in DIFC, making it at par with leading Captive domiciles around the world.
Digitization’s role in creating a cohesive and efficient ecosystem is one of our inspirations as we develop better experience to our clients in the centre. We want our clients to just focus on doing business so we created a model where DIFC’s offering is business-friendly and efficient. By digitizing the onboarding and licensing renewal process, offering convenient work permit issuance for the staff including Golden Visa, and unique client relationship management, we are offering a one-stop shop for client’s requirements to operate smoothly in the centre.
We are also enhancing our offering as a financial freezone by continuing to develop the state-of-the-art infrastructure and lifestyle in DIFC to make it attractive for talent to come and work in the centre.