Reinsurance
Last Updated :
04 July 2011
Extensive infrastructure investments coupled with growing populations and incomes underpin a dramatic increase in insurable assets in the GCC region. At present the insurance sector in Qatar is one of the fastest growing markets in the world. Between 2005 and 2009 the market grew at a compound annual growth rate of 23% (source Swiss Re). However low penetration rates, calculated at 0.83% in 2009 (source Swiss Re), and well below the world average of 6.9%, coupled with high per capita GDP rates, demonstrate the significant potential for growth in the future.
This impressive growth is being driven by a number of domestic factors including over US$130bn of anticipated spending on infrastructure between 2010 and 2012 (source MEED Projects). This is driven by large investments in infrastructure, energy, construction, water, transportation and logistics, and trade and tourism projects, as well as the privatisation of state assets, turning previously uninsured risks into risks that require insurance cover.
As demand for insurance grows, so does the need for reinsurance too. At present the market relies heavily on international reinsurance support, especially for the more complex and large risks. The aggregate GCC cession rate was 46% in 2009 translating into a reinsurance volume of around US$5.8bn while Qatar has the highest cession rate in the GCC at 57%. Although these rates show a declining trend, they remain considerably higher than in other countries of similar wealth (e.g. 10-12% in the US). Large reinsurance levels result in the product pricing in the local Qatari market being driven by global reinsurance cycles and companies.
The QFCA has recognised the potential of this market and we are actively striving to position the QFC as a major hub for reinsurance in the region, highlighting the attractions of the market through initiatives such as the annual Qatar MultaQa insurance conference. Meanwhile a number of the world’s leading (re)insurance companies are establishing a presence in Qatar to take advantage of the region’s extraordinary potential including AIG/Alico, Axa, Allianz, Mitsui Sumitomo and Zurich FS.
We have already made huge progress in building the foundation for growth in the reinsurance sector and offer distinct advantages over other locations; foreign insurers and reinsurers have full access to the domestic market and those operating within the QFC can be 100% foreign-owned, while there is a strong legal and regulatory framework based on International law. The growing number of insurance and reinsurance providers registering in the QFC is testament to the opportunity presented by this market. The powerful drivers for insurance products are set to spur demand for reinsurance and despite the market being in its infancy the potential for growth is compelling.
Director, Strategic Development, Qatar Financial Centre Authority (QFCA)
Akshay Randeva is a Director, Strategic Development at the Qatar Financial Centre Authority, where he is responsible for developing and implementing various strategic initiatives aimed at promoting Qatar as a regional hub for the asset management, reinsurance and captive insurance industries. more