Energy, entertainment industries to drive growth, but appetite for ‘takaful’ muted, says chief commercial officer
Lloyd’s predicts 20% growth in Dubai insurance premiums for 2018
Lloyd’s, the world’s oldest insurance market that operates in more than 200 countries, forecasts 20 per cent year-on-year growth for 2018 in its business written out of Dubai, as Middle Eastern economies diversify, offering new opportunities for insurers and reinsurers.
Gross written premiums generated from Lloyd’s Middle East and North Africa (Mena) base in Dubai International Financial Centre (DIFC) are expected to rise to US$115 million by the end of 2018, up 20 per cent from a projected $95m for 2017 and $80m in 2016, Lloyd’s chief commercial officer Vincent Vandendael told The National in an interview.
“This is steady, steady growth,” he said. He pointed out the figures are larger when Mena business generated out of all of Lloyd’s hubs that service the region – London, Singapore and Dubai – are taken into account. This business totalled around $650m in 2016.
The UAE remains the largest insurance market in the region with $216m of premiums in 2016, followed by Saudi Arabia with $135m, Bahrain $54m, and Qatar $51m.
“At the moment, most of [the Mena business] is written from London. But we think diversification in the regional economy is an opportunity to bring new products and solutions and develop our platform here,” Mr Vandandael said.
“We are consolidating our footprint here and our goal is to complement and add value to local markets.”
Emerging industry sectors – in particular renewable energy, which is targeted to make up 27 per cent of the UAE’s energy sources by 2021, and leisure and entertainment, such as Saudi Arabia’s plans for a mega-city the size of Las Vegas north of Riyadh – will drive this growth, according to Mr Vandandael, along with projected GDP hikes this year and next.
“If the renewables sector grows as planned, people are definitely going to want to insure their solar panels and wind turbines, and a new entertainment industry [in Saudi Arabia] will require cancellation, ticketing insurance, and other types of cover,” he said.
An unprecedented surge of renewable energy projects in the Mena region will need more than US$200 billion worth of investment in the coming years, according to research from business intelligence service Meed. More than 67 gigawatts (GW) of clean energy projects are currently at the design and study stage within the region, that will also necessitate a significant expansion and upgrade of existing power networks to facilitate the extra capacity.
Lloyd’s opened in DIFC in 2015 and in September this year secured trading rights in Abu Dhabi’s financial free zone, the Abu Dhabi Global Market (ADGM). This gives Lloyd’s cover holders and service companies increased access to underwrite reinsurance of regional and UAE risks.
Other growth sectors include engineering, construction and real estate, with billions of dollars of infrastructure projects planned across the region, marine cargo and hull, and specialist areas of insurance such as cybersecurity, political and terrorism risk, bonds and trade credit.
There is increasing, yet “cautious”, interest in sharia-compliant ‘takaful’ insurance, Cameron Murray, head of Mena at Lloyd’s, told The National, adding that a pipeline of “up to 10” Lloyd’s syndicates are going through the process of becoming sharia compliant. One syndicate, Atrium Underwriters, aims to complete the process by January 2018, he said.
However, as sharia scholars do not currently mandate the use of takaful by Islamic businesses – and in Saudi Arabia, insurance firms run as ‘cooperatives’, not takaful – it is “never going to be the mainstay of our business as far as Lloyd’s is concerned”.
“It’s is not a thing that’s suddenly going to explode; it’s a complement to the conventional offering we have. If we want to be relevant to customers and businesses in this region we should provide this product as an option," Mr Murray said.
“I think it reflects cautious interest in the market. [Takaful] it is seen by syndicates as an opportunity to differentiate themselves from others.”
Mr Vandandael said markets were more driven by price than a sharia compliant solution.