Multaqa 2016: Trust Re's Romel Tabaja on opportunities in MENA

Pressure on pricing and the increasing share of self-retained personal lines business is weighing heavily on the reinsurance market’s growth prospects in the region. What do you think the next 12 months has in store for the sector?

There is little expectation of any improvement in the short-term. However, this will change over time. Emerging markets hold the best prospects for the reinsurance sector given their currently low insurance (and reinsurance) penetration and the potential for developing new products.

 

How much will reinsurance capacity in the MENA region expand in 2016?

Reinsurance capacity in the MENA region is influenced by the capital available in the international capital markets. Reinsurance capital levels showed no growth for the first time in several years during 2016 renewals at an international level (Guy Carpenter 2016 global January renewal report). Traditionally, the MENA region, being a developing market, has attracted higher growth of capital than the international markets. Our estimate is that capacity in the MENA region will continue to grow in 2016, although at a lower rate than before, and will shift closer to the growth of the global economy.

 

The MENA region remains an attractive destination for western capacity. How can local (region-based) reinsurers compete with the influx of new business?

Regional reinsurers who aspire to make strategic improvements (for example, to risk management, systems, processes and analytics) in line with industry best practice will be in a strong position to compete.

Regional reinsurers can ensure that they remain competitive and relevant by investing in technology and operational infrastructure. Similarly, investment in human talent is key to remaining competitive, by having qualified staff to carry out strategic improvements.

 

Retention levels in MENA are low compared to other markets. With plenty of capacity and little incentive to retain more, what do you think needs to happen to increase these rates? Where does the responsibility lie?

Current market conditions do not seem to favour any increase in retention. Overriding commissions are important contributors to the bottom line of insurance portfolios and structural changes in operating models are required to alter the equilibrium as it stands now. Market discipline and improved pricing supported by analytics are key factors to motivate direct insurers to increase retention.

We do not see that the responsibility lies anywhere in particular. This is how the market operates and an increase in retention should be market driven. When referring to the insurance market, we refer to all stakeholders, including associations, regulators, re/Insurers, brokers and customers.

 

At Multaqa 2016 you are joining a panel entitled ‘The strategic outlook for MENA insurance markets and its global context’. What place does the MENA region play in the global market?

Firstly, it’s necessary to point out that the MENA region is at different stages of development. GCC countries are more affluent than countries such as Libya (North Africa) and Syria (Levant), which are struggling for political stability.

In addition, MENA is a large and growing market with a lot of potential, given that its insurance industry is relatively young and underdeveloped. Insurance penetration and density in MENA are comparatively low.

The region contributed less than one percent of the world’s insurance premiums in 2013, compared to almost five percent of global gross domestic product (GDP). Insurance penetration is low at about 1.3% compared to an average of seven percent for the rest of the world [Swiss Re Sigma 2014].

 

Trust Re recently celebrated its 25th anniversary. What do the next 25 years hold for the business? What are your expansion plans?

Some of the biggest achievements so far have been Standard & Poor’s assigning Trust Re an A- rating in October 2014 and continuing to post profitable results in an extremely competitive marketplace.

Looking ahead to the next 25 years, we will continue to live up to our moniker of ‘Trust’ in order to consolidate relationships with existing partners and to enable us to form new ones. Our aim will always be to realise our vision to be the Reinsurer of Choice.

Our aims for the future include establishing Trust Insurance Management to provide access to Lloyd’s expertise and A+ rating. We would also like to achieve an A rating or equivalent.

Also among our priorities are:

• To examine the feasibility of establishing a re-takaful operation;
• We have received board approval to write new lines of business, namely Aviation and Surety Bonds. Diversification in classes of business is part of our approach to respond to changing market dynamics;
• Our recently established Liaison Office in India and Representative Office in Morocco are expected to assist with our business development in the Indian subcontinent, south Asia and Africa;
• We plan to focus more on cross-selling between developed and developing markets.

 

Trust Re’s chief executive was recently awarded the reinsurer CEOs CEO award at Global Reinsurance’s MEA Risk & Insurance Excellence Awards. With this in mind, what qualities does Trust Re offer clients that want to partner with your company?

We add value for our customers by providing top financial security, capacity, excellent customer service and prompt claims payment. In insurance and reinsurance, claims will always be a key service, being the final stage in the process. Our response time is 48 hours.

Excellent customer service means understanding our clients’ markets, and being physically close to them through proximity of one of our branches or offices. With a growing physical presence (our recently established Representative Office in Morocco and Liaison Office in India and expanding team in the Labuan branch), this is increasingly possible.

We offer well qualified human capital reflecting the geographical areas in which we operate. Our staff is comprised of over 30 different nationalities. Respect for the different societies in which we operate and cross-cultural know-how is an integral part of the way in which we do business. Despite the fact that business is becoming ever more competitive, we never forget the importance of the human element in our dealings.