Featured

If You Build It They Will Come

Policy provides an overview of recent developments from the Middle East’s three established financial centres – Dubai, Qatar and Bahrain – and profiles three regional players who have called them home.

While Bahrain has a long history of serving the Middle East region as a financial centre – particularly when it comes to banking and Islamic finance – the emergence of the Qatar Financial Centre (QFC) and the Dubai International Financial Centre (DIFC) ushered in a new wave of global finance players to the region. All three regulatory jurisdictions, including the Central Bank of Bahrain (CBB), boast sophisticated legal frameworks and have attracted a number of re/insurance companies to the region. Competition between the three centres is healthy, with all three regulators frequently hosting and sponsoring insurance conferences in the region to showcase their offering.

However, to narrowly label the financial centres as fierce competitors vying for the attentions of global financial institutions may be a little too simplistic and overlooks their collective role in raising regulatory standards in the region as a whole. On February 22, 2010, the QFC Regulatory Authority (QFCRA) and the Dubai Financial Services Authority (DFSA) entered into a Memorandum of Understanding (MoU) to share supervisory information with respect to financial firms authorised to operate in the QFC and DIFC.

The MoU was signed on behalf of the DFSA by chief executive, Paul Koster, and Phillip Thorpe, chairman and CEO of the QFC Regulatory Authority, during the fourth GCC Regulators’ Summit, held in Doha. Thorpe welcomed the initiative: “As markets and regulatory jurisdictions are brought closer together in today’s evermore complex financial environment, it is increasingly important that regulators share information and working practices as a means of bolstering their effectiveness. This is especially important in neighbouring jurisdictions where cross border activities are therefore more likely to occur and where regulators are therefore more likely to need to communicate.

“This move marks an important development for both regulators in light of our clear shared interests. I am delighted that we are able to sign this MoU with the DFSA and I anticipate that a closer relationship will significantly benefit both parties,” he added.

The onset of the global financial crisis may have dampened the enthusiasm of global insurance players looking to establish a regional hub but new licenses continue to be issued, with more expected over the coming year. The three financial centres continue to fine-tune their offering and introduce bold new initiatives.

QATAR FINANCIAL CENTRE

One of the most interesting recent initiatives from the QFC Authority was the launch of the ambitious Qatarlyst project last year. Based in Doha and ultimately backed by the Qatari government, Qatarlyst is a web-based system that facilitates trade between insurers, reinsurers and brokers. Its backers boast that it will be the only industry-scale system of its kind to cover the entire transaction process including quotation, placement of risks, negotiation and binding cover, notification and adjustment of claims, plus the recording of accounting information. There are more than 20 registered users of the system to date including: BNI, Qatar Insurance Company, RFIB Insurance Brokers and, most recently, Al Fajer Retakaful.

The QFC has issued licenses in the past year to: Japanese insurer – Mitsui Sumitomo Insurance Company, reinsurance broker – Chedid & Associates Qatar, takaful operators – T’azur Company and Allianz Takaful, plus SEIB Insurance & Reinsurance Company. The number of insurers operating from the QFC is 10 and the number of insurance intermediaries is nine.

The QFC hosts the annual MultaQa Qatar conference in March.

Company focus: Qatar Reinsurance (Q-Re)
Recently licensed by the QFCRA, Q-Re hit the ground running and began operations in January 2010 in time for the renewal season. Q-Re is a subsidiary of Qatar Insurance Company International (QICI) and the Qatar Insurance Company (QIC), with former COO of QICI, Dermot Dick, taking the helm of the new reinsurance entity as CEO.

QICI’s existing global reinsurance book (worth around US$100m in 2009) has been rolled into the new entity and the firm will continue to target Afro-Asian markets in its three core lines – energy, marine and short-tail property. Expansion plans on the horizon include building its existing Singapore portfolio and seeking a European reinsurance licence from the Maltese Financial Services Authority (MFSA).

CENTRAL BANK OF BAHRAIN

The CBB recently became the first regulator in the region to introduce minimum qualification requirements for representatives of insurance companies. To underpin this initiative, the Bahrain Institute of Banking & Finance (BIBF) and the Chartered Insurance Institute (CII) have introduced an internationally recognised qualification (in English and Arabic) with a regional emphasis.

Recent entrants to the market include Legal & General Gulf and Legal & General Gulf Takaful; the two new companies were granted licences to offer life insurance and takaful services. Bahrain is home to six regional reinsurers including Arig and Trust Re.

The CBB hosts the annual Middle East Insurance Forum in February and recently hosted the sixth Gulf Insurance Forum.

Company focus: Hannover Retakaful
Attracting Hannover Re to Bahrain to establish its takaful subsidiary (Hanover Retakaful) in 2006 represented a major coup for the CBB. Hannover Retakaful writes takaful business worldwide in over 70 countries and in all lines of business; treaty and facultative.

In an interview with Policy last year, Tarik Aouad, chief underwriting officer, Hannover ReTakaful, commented on the industry potential: “Personal lines is a natural area of takaful which offers the right type of risk homogeneity that is fundamental for a takaful pooling arrangement. It is worthy to mention that there is a huge potential for family takaful in countries with big Muslim populations such as Indonesia, Egypt and Pakistan.

“However, takaful is also ready to service the shari’a-compliant insurance needs of the increasing number of commercial and industrial risks.”

DUBAI INTERNATIONAL FINANCIAL CENTRE

The Dubai Financial Services Authority continues to support and host a full range of specialist events including the Islamic Financial Services Board’s (IFSB) fifth seminar on the future regulation of takaful in February and the inaugural World Space Risk Forum in March. Like the other financial centres, but perhaps even more so, the DFSA is proactively seeking to encourage and host more captive insurance companies. Arguably its biggest coup to date was the hosting of the World Insurance Forum in 2008.

Recently authorised entrants to the DIFC include: Gulf Re, Allianz Risk Transfer AG (ART). Zurich Insurance Company, a subsidiary of Zurich Financial Services Group, was granted a new licence that allowed the company to expand its activities and conduct general insurance operations from the DIFC. This brought the centre’s insurance cluster to 31, including some of the world’s largest international names.

Company focus: QBE Insurance (Dubai)
QBE Insurance received a licence from the DFSA to open an office in the Dubai International Financial Centre last year. The office is headed by Khalil Eid, who serves as general manager and senior executive officer of QBE Insurance Europe (Dubai Branch).

The firm’s offering in this region is structured around eight product-focused underwriting divisions: casualty, reinsurance, property, motor, marine & energy, specialty, and aviation.