Dubai is likely to emerge as the insurance capital of the Middle East, fed by steady growth in recession-resistant businesses and the needs of the oil and gas sector, the region's largest insurer said yesterday. Marsh, one of the world's leading insurers, saw revenue increase 28 per cent last year in the Middle East and by more than 20 per cent annually in the two years before that, said Dan Glaser, the company's chairman and chief executive. Marsh agreed in December to buy HSBC Insurance Brokers, which will give it an even bigger presence in the Middle East and Asia when the deal is finalised by the beginning of next quarter.
"We've identified this part of the world as very important to our future," Mr Glaser said. "Maybe mid-size companies in the past just hoped for the best, but insurance has certainly been growing as an industry in the Middle East in general. "There is a burgeoning local marketplace, and that has the possibility of becoming an actual centre of insurance" on the level of London or Singapore, he said.
The volume of insurance premiums has grown steadily across the region in recent years, but the growth has been led by the UAE. In the past two months, the Government moved to tighten regulation of the fast-growing sector by revoking the licences of 74 brokerages and setting minimum capital requirements for insurers. The growth of the industry has brought with it law firms, accountants, loss-adjusters and other companies, exerting a multiplier effect on the emirate's economic growth, Mr Glaser said.
And the need for insurance from large global companies such as Marsh, AIG and Zurich will only grow as UAE firms are required to adjust their management and operating practices as they become more active overseas, he said. As an example, Mr Glaser noted, Gulf executives operating overseas face the unfamiliar risk of being sued for sudden changes in their companies' performance, a risk that can be reduced with changes to the companies' governance structure to emphasise oversight by boards of directors.
"To give you an idea of what the globalisation impact is, there is a very benign risk around management liability in the Gulf. You rarely hear about large directors' and officers' claims in the Gulf, but it's a significant exposure in the US and parts of Europe," he said. "If you look in the Gulf, as an example, many of the boards are basically cross-linked, as opposed to being independent and non-affiliated, and there probably needs to be a bit more challenge from a board level."
For Marsh, the top three growth sectors in the region are oil and gas, infrastructure development and employee benefits, with energy companies in particular requiring increased help in dealing with risks that now include climate change, scarcity of supplies and uncertain oil consumption trends, Mr Glaser said. "The energy companies in this region, whether they know it or not, are part of the global energy industry," he said.