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Massive Potential for Insurance Industry in the Region: DIFCA

The publication, titled “Guide to Re-Insurance and Captives in the DIFC,” provides an overview of the core issues of interest to (re)insurers, brokers, underwriting agencies, businesses considering establishing or managing a captive insurer, insurance service providers and back-office support functions that are looking at establishing a presence in the DIFC to carry out business across the region.

“The potential for the development of the insurance industry across the DIFC region is huge. The historically low insurance penetration levels seen from within the region are likely to grow exponentially over the next few years to those experienced in more developed markets. The DIFC continues to receive a great deal of attention from the global insurance industry who recognise the promose shown by the centre to become a regional hub,” said Abdulla Al Awar, chief executive officer of DIFCA.

Al Awar said the low penetration levels is due primarily to a general lack of insurance awareness by regional firms.

The landscape is changing though with economic development, growing industrialisation, rapid growth of international trade, international mergers and acquisitions, improved regulation and increased focus on 
corporate governance.

“The region is witnessing a change of attitudes towards corporate risk management, and a growing awareness of the need for innovative ways to finance the future cost of corporate risk,” said Al Awar.

Moreover, with the recent turbulent finance and insurance markets, volatile premium fluctuations and reduced capacity, regional firms are now looking beyond the traditional insurance markets and assessing alternative 
opportunities.

The insurance industry has enormous development potential, said Al Awar, and it can tap into the region’s huge programme of infrastructure spending on energy, water, transportation and petrochemicals; mega projects; the growing demand for aviation and other forms of commercial insurance with the rapid development of trade in the region. The wave of privatisation of state assets also resulted in previously uninsured risks requiring insurance cover for the first time, including the introduction of compulsory health insurance, notably in Saudi Arabia and the Gulf Cooperaton 
Council countries.

DIFCA said that for regional firms looking to finance and manage corporate risk, the DIFC’s legislative framework, coupled with its favorable tax environment, offers a convenient platform for the establishment of captive insurance companies. The flexible yet robust onshore regulatory environment of the DFSA also boosts companies housed at the DIFC. 
— With inputs from Wam