Exposed to slowdown but reinsured for growth

Gulf Reinsurance (Gulf Re) began operations in Dubai last year and sees itself well positioned to capitalise on opportunities in the GCC's infrastructure and energy sectors. And such opportunities will continue to appear in the region despite the impact of the global economic crisis, said CEO Gail Norstrom. "Reinsurance will be affected only to the extent that insurance premium growth has slowed down and there will be a further slowdown," he told Emirates Business. "There will be a slower pace of growth, but not a decline," he said. Gulf Re is owned by the Gulf Investment Corporation (GIC) and Arch Capital Group. Compared to the global average, insurance penetration rates in the region are quite low at about one per cent of the GDP. Do you see the market growing in the near future considering that the global economic downturn has affected the region? With the region's low penetration and strong economic growth there is potential for the market to develop. The growth of the reinsurance business in the GCC will continue in 2009. Reinsurance will be affected only to the extent that insurance premium growth will slow down. There will be a slower pace of growth, but not a decline. True, compound annual growth rate was 15 to 20 per cent in recent years and in 2009 insurance premiums may grow in single digits, but the engine of growth in the region is still functioning, the global recession has not had much of an impact. GDP here is growing whereas in other parts of the world the growth is flat. The economy is expanding and the base of insurance premiums is expanding, so we are better off here. We believe that, going forward, Gulf Re is well positioned to meet the evolving requirements for increased reinsurance capacity in the region. Why was the impact of the downturn on the sector limited? There is higher transparency and banks and reinsurers have different risk management models. Reinsurers continue to pay claims, renew existing policies and treaties, write new policies and reinsurance treaties and develop new products. Besides, the leverage is low. And add to that the conservative investment philosophy. How was the first year of operations in the global economic downturn and what are your premium collection targets this year? Have you had to revise these targets? This year will be our first full year of operations and we expect to exceed our modest premium goal of about $25 million (Dh91.7m). Our targets are modest and we have not had to revise them. Among the key milestones for the company over the past year was the assigning of a financial strength rating of A- and issuer credit rating of "a-" by AM Best Company, an authoritative source of insurance ratings. The outlook for both ratings, which were reaffirmed in May, is stable. We are pleased with the results. We believe that we will be able to cater to the increase in demand for reinsurance in the region. With the strong support of our shareholders and an experienced management team we are focused on meeting the needs of clients and sharing best practices with them, as well as with brokers and peers across the region. Which sectors will you focus on to tap business opportunities? Our key focus has been business opportunities arising from the Gulf, including high-value oil and gas, industrial, utility and transportation assets. We support insurers by writing property and casualty lines of reinsurance, including energy, commercial transportation, marine, engineered risks and property, both on a treaty and facultative reinsurance basis. What are your expansion plans? We plan to expand operations in the Middle East and North Africa in the medium term. In terms of product expansion, we will focus on marine, offshore energy and casualty lines. In the long term, emerging markets will be our focus though the GCC will always be the core of our business. What kind of trends are emerging in the UAE reinsurance sector? In terms of the product requirements of insurance companies, it is a pretty standard market and one would not expect to see much recession-catalysed innovation. Do you continue to face a shortage of reinsurance professionals in the region? There is a relative scarcity of professionals such as underwriters but in the case of other professionals, such as information technology, the quality of human resources is good. Is the GCC better placed to facilitate reinsurance growth than other regions? Certainly, because the GDP here is growing whereas in most other parts of the world the economies are flat. The economy here is expanding and the base of insurance premiums is also expanding. Have you any plans to enter the Islamic reinsurance sector? Not at the moment. However, if it makes sense to do so we may. One of the attributes of Gulf Re is that we are connected to GIC, and if it makes sense we can create a sister company with an appropriate capital base. Gail Norstrom CEO, Gulf Re Gail Norstrom has more than 38 years of insurance industry experience. He pre