A regional reinsurance hub in the making
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. This growth emanates from the mandatory line (health), as well as P&C insurance. The improvement was evident in 2021, which was a positive year of growth that is expected to continue for the next few years.
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Opportunities in cyber
DIFC also conducted an independent market survey during DWIC where our respondents signified their strong confidence in the whole MEASA market over the next 12 months. Lines of business where they see growth opportunities are cyber, liability, property, and energy. Owing to the pandemic, use of digital transactions online accelerated. 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. The digital aspirations of these companies suggests there needs to be a serious focus on ensuring they are well-protected for potential losses from malicious cyber-attacks and ransomware. Cyber, therefore, 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.
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.
The role of a financial centre with the growing opportunity presented by increased reinsurance demand, What part can DIFC 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 an understanding of the markets’ culture and landscape
The DIFC is also committed to improving talent in the region through the presence of the 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 further build awareness of insurance and of the relevance of proper risk management.
Initiatives DIFC has undertaken to make itself ‘reinsurance friendly’ over the past few years
We maintain an open dialogue with our own independent risk-based regulatory body, the DFSA. These conversations with the market and with the DFSA have always been a priority because they 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 an application 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, is also an encouraging way to attract start-ups in the centre.
Regulation and data protection
The regulatory environment of the 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 world-class data protection (GDPR-compliant) and Intellectual Property (IP) laws that give our reinsurers the level of comfort to operate in a jurisdiction that is familiar to international players and encourages them to develop new products designed to meet the region’s needs.
Building on success
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 Center’s reinsurance market through regional and global roadshows and events, is important. 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 our reinsurers utilize. The DIFC draws cedants and brokers from the GCC, Africa and South Asia and other parts of the Middle East.
Captives up next
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 this helps indemnify some or all the liability assumed by these Captives. The DFSA has recently adjusted the DIFC’s Captive regime, making it at par with leading Captive domiciles around the world.
Digitization has helped us develop a better experience for our clients as well as a cohesive and efficient ecosystem. 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 Visas, and providing unique client relationship management, we are offering a one-stop shop for clients to operate smoothly in the centre.
We are also enhancing our offering as a financial free zone 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.