Following his latest appointment at BSA Ahmad Bin Hezeem & Associates LLP, one of the region’s leading law firms, Al Morkeb Magazine had the chance to interview Simon Isgar, the new Head of Insurance & Insurance Pactice, about his plans for his new position and the challenges that are facing the sector and the actions taken by the responsible authorities in the UAE to coop with them.
What are your future plans to develop and enhance your work with the Insurance sector?
Technology is the buzz word these days. We are surrounded by new concepts such as “FinTech” and “InsurTech” and any legal insurance/reinsurance practice must, in my view embrace technology and work with clients to support their technology while offering new and alternative legal services and support. By way of illustration, litigation and courts are becoming automated services with new technology, where litigants receive a quicker and cost effective service.
In the same way law firms, including those with insurance & reinsurance law practices must think the same way and offer new alternatives in the way legal and professional services are procured to their clients such as develop legal regulatory insurance know-how platforms and offer virtual defense lawyer services for insurance disputes, which could be licensed by the firms to their respective clients. This will lessen the involvement of client facing lawyers and enhance client involvement in their organization’s management of legal matters.
In addition, I believe that regulators have a pivotal role to play in the insurance sector, both in terms of technology and working closer with regulated insurance organizations including insurance lawyers. I would like to engage with regulators more as a lawyer to work with them in the sense of offering a difference perspective from a lawyer in developing new regulations and laws in terms of InsurTech and how legal support and services can be procured through alternative methods, providing more efficiency, reducing costs and enhancing BSA’s brand awareness and professional reputation.
In your opinion, what are the most important challenges facing the insurance companies in the United Arab Emirates nowadays?
In my opinion, I believe that insurance companies in the United Arab Emirates UAE are challenged by a number of issues reflective of the lack of maturity of the current UAE insurance market, unlike the European, Asian or US insurance markets. One of these fundamental issues is the lack of local reinsurance capacity, where the UAE insurance market is heavily reliant on the overseas reinsurance capacity, including the UK London and US markets. This creates a trend of local UAE insurance companies (often referred to as cedent companies – they cede the risk back to the overseas reinsurer) simply acting as a front for the reinsurer while using the UAE insurance company’s local paper.
This present inherent problems with UAE insurance companies becoming reliant on overseas capacity, while not managing and taking control of their local risk, which in turn impacts on relationships with reinsurers possibly reducing and limiting quality overseas capacity to the market. That said, we have seen some positive signs where UAE insurance companies are now taking retention and taking some of the risk locally albeit small. The UAE regulator, the Insurance Authority is also addressing this issues we believe with looking in to compulsory risk retention for UAE insurance companies, similar to the Saudi Arabian insurance market through Saudi Arabian Monetary Authority (SAMA) as well as promulgating the new UAE Reinsurance Regulations.
UAE Insurance companies are further challenged by recent new laws and regulations that have come into force, such as the UAE Financial Regulations] given that the UAE insurance market is still relatively a new developing market ever evolving with new lines of risk capacity. The UAE Financial Regulations are far reaching in terms of matching similar solvency II requirements of Europe in the UAE insurance market. This has forced UAE insurance companies to assess their risk base appetite, while meeting very prescriptive legal requirements for prudential measures such as the Solvency Margins and the Minimum Guarantee Fund. Often, these requirements have introduced the need for more resource from the UAE insurance companies while not necessarily improving the profit margins and loss ratios.
However, the recent laws and regulations are a welcome change to the UAE insurance market, which will overall improve risk appetite, underwriting and the quality of local and overseas reinsurance capacity, while offering protection to insured in terms of comfort around UAE insurers meeting their indemnity obligations under claims payments.
Do you think that the UAE insurance sector is able to attract more investments to this field? and why?
Generally, yes. The UAE insurance sector has great potential to attract further investment from overseas investors given the diverse nature of the UAE and its geographical status. However, I believe that the UAE insurance sector must first consolidate to a smaller pool, immediately think about technology as its primary focus and work closely with the UAE regulators to achieve a less fragmented regulatory market. Foreign investors will also include those overseas reinsurers offering capacity to the UAE insurance market and must be persuaded to seriously invest its intellectual as well as its financial resources in the UAE.
What do you think about the actions taken by the responsible authorities in the UAE to promote and develop the sector?
Yes, the UAE Ministries and Regulators, and specifically the Insurance Authority have done much to promote and development the UAE insurance sector. The Insurance Authority often holds conferences, seminars and workshops with the insurance industry promoting the need for consultation and further development of the insurance market. We have seen the UAE regulators embrace technology including the Dubai International Financial Centre (DIFC) and its regulatory body, the Dubai Financial Services Authority (DFSA) with a FinTech Hive as well as the new Abu Dhabi Global Markets (ADGM). The Insurance Authority have signed a number of Memorandums with other overseas regulators, such as India to promote the UAE insurance sector.
Interview was published in Al Morakeb Magazine