Arig says it has zero debt, expects surge in 'fictitious' claims this year

Bahrain-based Arab Insurance Group (Arig) expects to see an increase in "fictitious" claims this year, a top official from the company said. "We expect an increase in moral hazard or fictitious claims," Yassir Albaharna, Chief Executive Officer of Arig told Emirates Business . "Until today I have not seen that because we are only on the third month. But we believe there is a human tendency to increase fictitious claims, and this is a general trend." Despite the negative economic climate, the non-life and life reinsurer is looking at a growth in their revenues. "I am optimistic and we will strive for growth. All the signs of premium growth that I receive so far is positive," he said. "What we cannot grow in the UAE we will grow in other market. What we lack in the UAE we will compensate in China, which is now the largest market in Asia. We are looking at growth in the Sub Saharan Africa and Egypt." He said the company – whose major markets are Turkey, Saudi and the UAE – saw major claims from the UAE last year but not due to the financial crisis. "It is because of high and heavy competition here," he said. In 2008, the group's reinsurance portfolio grew by 12 per cent to $280.7 million (Dh1 billion). However, the group recorded a combined net loss of $28.6m due to write-downs on invested assets as a result of dramatic decline in global equity markets. The loss represents 10.6 per cent of the group's average shareholder's equity. Overall, the company is cash-rich and is zero-leveraged. "We have zero debt in our books, we have too much capital," Albaharna said. "But we do not want to return to shareholders because the business – reinsurance – need the financial stability and financial strength to ensure that the clients have the comfort that we remain there to pay the claims." He said assets under management are close to $650m, in which 70 to 75 per cent of which are either cash or fixed deposit. "We have a lot of commitments so there is no point in keeping it as cash, we keep it as fixed deposit with a tenure of six months or one year depending on the maturity of the claims." Albaharna added that 80 per cent of the company's investments are in cash and fixed deposits. "We are not into speculative products or real estate or derivatives. We make sure that the money is there, although it is tight, it is invested in readily convertible cash," he said. Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here .