- Dubai-based specialist reinsurer maintains strong balance sheet during first year of operations; well positioned to capitalise on opportunities in infrastructure and energy
- Regional insurance purchase penetration rates still low compared to global average; worldwide sector outlook remains positive
The outlook for the reinsurance sector in the Gulf Cooperation Council (GCC) states continues to remain positive despite the impact of the global financial crisis, the Chief Executive Officer of Gulf Reinsurance Ltd. (Gulf Re) said today. Gulf Re, which recently completed its first year of operations from the Dubai International Financial Centre, is especially well positioned to capitalise upon opportunities in the regional infrastructure and energy sectors, Gail Norstrom said.
Since launching operations, Gulf Re has maintained a strong balance sheet and achieved growth primarily due to its international best practice underwriting capabilities and boutique-style consultancy approach. A specialist reinsurer focused solely on business opportunities emanating from the Gulf, including high-value oil and gas, industrial, utility and transportation assets, Gulf Re supports insurers by writing a broad range of property and casualty lines of reinsurance, including energy, commercial transportation, marine, engineered risks and property, on both a treaty and facultative reinsurance basis.
The company, which is equally owned by Gulf Investment Corporation (GIC) and Arch Capital Group Ltd. (Arch Capital), provides reinsurance support to a range of leading regional firms in the oil and gas, petrochemical, power and manufacturing sectors, as well as portfolio support to many of the region’s largest insurers.
Among the other key milestones for the company over the past year was the assigning of a financial strength rating of A- (Excellent) and issuer credit rating of “a-“ by A.M. Best Company, an authoritative source of insurance ratings. The outlook on both ratings, which were reaffirmed in May, is stable.
“We are very pleased with the results that we have been able to achieve in our first year of operations,” said Norstrom. “We believe that going forward, Gulf Re is well positioned to meet the evolving requirements for increased reinsurance capacity 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.”
Norstrom highlighted that insurance penetration rates in the region are still very low, at around one per cent of GDP, compared to an average of roughly three per cent in other emerging markets. “If regional penetration rates were to reach closer to the world average of 7.5 per cent, that could potentially generate over US$15 billion of additional annual premiums for the industry,” he said.
Norstrom added that of late, worldwide, the insurance and reinsurance sectors have generally far outperformed the financial services sector, partly due to the generally more acute focus on risk management among insurers and reinsurers.
“We are firmly optimistic about the future. While the size of the financial market in our region is still relatively small, it has been experiencing 15 to 20 per cent growth year-on-year. It is true that the pace of this expansion may decline slightly in the near term as a consequence of the less robust overall economic environment, but investments will continue to move forward. We see continued government investment in infrastructure projects throughout the region as a huge positive for the sector,” Norstrom said.
