On common ground

A continent of opportunity and shared experiences is attracting Gulf investors to Africa, according to some of those who are already making their moves in the region. Jehan Dias, Head of Facultative, and Kumar Rajan, Senior Underwriter, Practice Leader Marine & Energy, for Gulf Re, represent some of those just making their mark in Africa. Gulf Re was set up in Dubai in May 2008 in response to a desire to keep reinsurance premium in-house. The backers were the six central banks of the Gulf Cooperation Council (GCC), which were heavily investing in power generation projects and steel production.hideSix years later, the reinsurer has developed strongly enough to spread its wings and develop into new markets. Mr Dias says the firm offers both treaty and facultative (fac) business—primarily treaty business in the Gulf and fac business beyond. “As a reinsurer, we need diversity in terms of products and territory, which is why since the beginning of the year, we have been looking to expand into Africa,” he says. “For us, Africa is very much new territory. We have started writing business here but we are also at the fact-finding stage, working with brokers and ceding companies.” Appetite Mr Dias explains that the firm is learning its way into the region “but is going into the market with some appetite.” The firm is exploring business opportunities in oil and gas and mining, as well as more generally in large-scale infrastructure projects. With so many new oil and gas discoveries, Mr Dias sees an opportunity for Gulf Re to be able to support the market from exploration to extraction. He says the firm’s experience in similar projects in the Middle East gives it an edge in terms of understanding the risks at every stage of such projects. “The idea is to come in early,” he says. “We don’t want to wait for the projects to develop and then face massive competition. We would rather work with people from the start, where possible.” Gulf Re is already writing business in Nigeria and Angola, while Mr Dias says the firm ‘has its eye on’ Mozambique. Part of his remit is to support existing Middle East development in Africa. For example, Eko Atlantic in Lagos, where an ambitious construction project is underway. That project is designed to provide the space and infrastructure to house 250,000 people and become the workplace for a further 150,000. The city is being constructed on land reclaimed from the Atlantic Ocean, on Lagos’ Bar Beach. The project was created by HE Mohammed Alabbar, Chairman of Emaar Properties (the firm behind the Burj Khalifa in Dubai). Another example is the ACWA Power company, which is spreading its investment into Africa. “They grew up within the GCC but have recently completed a solar power project in Morocco,” explains Mr Dias. That project is located in the south of Morocco, with a gross generation capacity of 160 MW, with three hours of thermal energy storage. Once completed, it will be the largest power plant in the world of its type. It is projects such as these that Mr Dias can see Gulf Re supporting, not least because the firms involved are used to working together. There is also a sense that these companies are recognising the need to develop beyond the GCC and also beyond oil and gas, as that market changes globally. The opportunities on home ground may not be as good in the future and these firms now have the strength to operate in new territories. Speaking earlier this year in Lagos, HE Mohammed Alabbar said: “I come from the Middle East, from a young country. I understand Africa a little better. Our aim is to build extraordinary stuff and we have seven African countries in our radar. Nigeria is the largest.” Another shared experience, believes Mr Dias, comes from the way in which overseas investors have moved into the markets. “In our home countries we experienced the Koreans and Japanese moving into the market for the large infrastructure and construction projects. Now in Africa, the Chinese are exploiting these same opportunities. Again, it gives us shared knowledge and understanding of how the markets are operating.” Years of experience In contrast to Gulf Re, which readily admits to being the new kid on the block in terms of Africa, Trust Re has been operating in African markets for many years. For the past decade it has been partnering with businesses across the region and is looking to expand still further in the coming months. The firm has already expanded well beyond its Bahrain base, with offices in Malaysia and Cyprus. Senior Adviser to the Management, Nabil Hajar, explains that the company would like a firm footing in Africa and has been considering its options. “We tried South Africa and we have looked at Nairobi; we work directly with insurers in Libya and Algeria.” Seychelles and Mauritius have also been on the radar. Mr Hajar says they are keen to cover both French- and English-speaking markets but also acknowledges the differences in those markets and the need to respect that when opening an office on the continent. He is keen that the firm should be able to cover a wide number of territories from any office that it does open. The need to have a physical presence on the continent reflects the growing interest in Africa across the Middle East. Like Gulf Re’s Mr Dias, Mr Hajar says: “There is an interest in the Middle East in Africa and interest in Africa is growing.” But he stresses that this is not about taking over in any sense. “From our point of view, it is important we always respect the country we work in and more widely the region. We always try to promote the culture of the country in any area where we work. “We try to share as much as possible so partners can gain from the experience more widely.” He also points out that, as reinsurers, there is a less competitive edge to the business. “You have a risk that is worth millions of dollars. No one reinsurer will take on the whole risk. You have to spread the risk and when there is a claim, we share those costs. The way we operate does mean we have a different attitude to how we do business.” Having said that, Mr Hajar also says companies are keen to win the business and there is a noticeable uplift in competition for African business now as overseas markets recognise the opportunities for growth in the region. “Everyone wants to grab a piece of the business,” he says. The danger is, he adds, that competition could drive prices down to uncompetitive levels and reinsurers are then left with some tough strategic decisions about whether they want to be involved with such business. However, Mr Hajar also sees growing professionalism across Africa and risk management playing a large part in that. As companies mature, they are adopting a more sustainable approach to business and much of that is down to improved risk management combined with the need to comply with increasing regulatory requirements. In terms of the increasing interest from outside the region, and the new competition that is bringing, Mr Hajar says the firm is ‘here to stay’. He adds: “We are a regional reinsurer and we include Africa as part of that. We are long-term players and we will be staying here for a long time.”

On common ground

Want to read this article?

Read Next

Favourable aviation insurance market for now, says WTW

London Market increases contribution to UK economy

New management liability product from RSA Insurance

P&I group Skuld announces $10m members’ credit after 297% profit increase

NY bill would add new class of standalone business interruption cover

Favourable aviation insurance market for now, says WTW

London Market increases contribution to UK economy

New management liability product from RSA Insurance

P&I group Skuld announces $10m members’ credit after 297% profit increase

NY bill would add new class of standalone business interruption cover

Want to read this article?

Read Next

Favourable aviation insurance market for now, says WTW

London Market increases contribution to UK economy

New management liability product from RSA Insurance

P&I group Skuld announces $10m members’ credit after 297% profit increase

NY bill would add new class of standalone business interruption cover

Related Articles