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Reinsurance market facing challenges

Manama, March 28, 2011

The reinsurance market is currently very challenging, in the wake of the earthquake and tsunami disaster in Japan, according to Arab Insurance Group (Arig) chief executive officer Yassir Albaharna.

He said it was too early to tell how this would affect the industry but Arig did not have a huge exposure to Japan.

The unrest across the Mena region also remained too early to call but he pointed out that most insurers did not take out what was known in the insurance industry as SRCC policies, meaning that most people were not covered for the effects of strikes, riots or civil commotion.

The market was currently soft and that rates were low against risk rates, said Albaharna following Arig's annual meeting in Bahrain yesterday.

'We are trying to be more selective, but in a period of economic uncertainty people tend to buy the bare minimum of insurance.

'With little construction and engineering projects going ahead and marine cargo down it is a slow market.'

In his report, he said growing business in 2010 did not come without risks attached, as original market terms generally continued to decline while claims rose beyond the previous year's level.

'Making the right decision between acceptance and declinature was key to whether money would be earned or not,' he said.

'In many cases, a wrong turn will not immediately show as claims usually take time to become known and be processed.

'However, in a climate of eroding profit margins, contracting investment returns accompanied by a rise in large losses frequencies, quarterly or annual statements will only present half the answer to shareholders on whether an insurer has recently added value to its balance sheet or not.'

'At Arig we take a long-term view to protect our stakeholders' interest,' he added.

'When we have identified a loss-making segment or account on our books, we seek to take away its potential impact either by re-negotiating terms and risk management measures with our clients, or by terminating the account if no agreement can be established.

'We strongly believe that the ability of a reinsurer to produce profits across market cycles is defined by the ability to contract in situations when markets start becoming unattractive.'

Arig declared a net profit of $20.8 million for the year, representing a 7.9 per cent average return on the company's equity.

Shareholders yesterday approved a 7.5 per cent cash dividend, worth $14.9 million.

The meeting also elected members of the board of directors for the next three years. Khalid Ali Al Bustani was re-elected as chairman and Khalid Bin Kalban as vice-chairman.-TradeArabia News Service




Tags: Bahrain | banking | investment | Reinsurance | finance | Arab Insurance Group |

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