Mr. Syed Siddiq is currently working as Head of Technical-commercial at MetLife AIC ANB Cooperative Insurance Company in Saudi Arabia. This is his 16th year in the insurance industry and one of the highly successful technical managers in the Saudi Insurance market. He has completed his ACII from Chartered Insurance Institute UK and holds the title of a Chartered Insurer. He is also a member of the Faculty of Underwriting in the Chartered Insurance Institute, UK. He has done his MBA from Bangalore University, India and is also a Microsoft Certified Systems Engineer(MCSE).
S.G.Afzal Biya Bani: Can you brief about your experience in Engineering Insurance and the challenges in Saudi market?
Syed Siddiq: Firstly speaking about Engineering Insurance especially related to Construction Industry, the Saudi Arabian Economy has been a front runner in the Middle-east in terms of the number and volume of projects announced in the past 5 years.
Although there has been a slight slowdown due to the fall in oil prices the Saudi Arabian economy continues to signal an upward push showing that its growth model will remain unaffected despite fall in oil prices with its consistent investment over the years across sectors leading to a fast diversifying economy.
This has provided an opportunity to Insurers in Saudi Arabia to write large volumes of Engineering Insurance for these projects. Currently we are still seeing many submissions ranging from huge infrastructure projects, erection risks and simple constructions projects from the market.
The market is very soft in respect of terms and conditions for this line of business but it should be noted that very few insurers like our company are actually technically evaluating projects before putting up capacities. This can also be attributed to the fact that there is still lack of proper and required underwriting information to complete a proper technical review.
This line of business usually sees severity losses hence improper deductibles, terms and conditions will put the capital of many companies at risk. This could be one the reasons for seeing an increase in Loss ratios in this line of business which used to be in the range of 25 to 30% in 2011 – 2012 going upto 52 to 56% in 2013 & 2014 across the market in Saudi Arabia.
S.G.Afzal Biya Bani: What are the Insurance Regulatory norms on Liability Insurance in Saudi market?
Syed Siddiq: Liability Insurance in a strict sense covers many areas. It ranges from the normal General Liability involving Public and product liability to highly specialized covers like Professional Liability, Environment Liability, Management Liability etc. For the sake of today’s discussion I will briefly touch these areas.
In respect of General Liability Insurance there is a potential of tremendous growth for this line of business in Saudi Arabia. Regulations are being proposed to make it compulsory to have Public Liability Insurance for certain high risk industries and businesses.
This will increase the market penetration and density for this line of business. However this is still in the making as various governmental bodies are being engaged to determine the scope of this; prior to its implementation. However it is anticipated that this could happen within a 2 year time frame.
Presently what we observe is that General Liability Insurance is either taken by multinational companies or by contractors who are mandated by Principals to have this coverage before they can start working on any project.
However awareness for this line is growing and some large claims in past few years have prompted companies to seek protection for this line of business. Yet capacity for this line is restricted in the Saudi Insurance market and very few companies like ours offer special covers like worldwide jurisdiction etc.
In respect of Professional Liability we can say that this line is purely driven by various regulations mandating this cover for certain types of companies. In the financial sector, it is the CMA requirements mandating this cover and of course the contractors are mandated to have this cover as required by Project owners and principals. This line of business has seen growth in the past 5 years and is predicted to grow even further.
In respect of Environment and Management Liability covers, the market awareness and requirements are very few hence we do not see many requests in these lines of business. However with regard to management liability the awareness is growing and more and more companies are seeking to have this cover.
S.G.Afzal Biya Bani: Is D&O Insurance products any different from other regions? And how is the demand?
Syed Siddiq: As mentioned earlier D&O Insurance offers coverage for Management Liability. Saudi Arabia has fairly good standards and requirements for corporate governance in the Middle – East. Regulators like CMA are more stringent now in implementing their regulations and are seen as one of strictest regulators in the Middle East.
Saudi stock market is opening up to foreign investors in the coming months, and following the accounting scandal at Mobily (Telecom Provider), the CMA has started issuing more fines and scrutinizing listed commercial companies frequently to bring them up to international standards.
Analysts now place a stronger emphasis on examining the role of the board of directors, what managements says about the company and the announcements they make, and checking financial statements. Even the international auditing firms have raised their fees as they see their exposure increasing with regards to working for listed companies.
This will push companies to take adequate protection against management liability in the coming days hence we expect to see a growth in this line of business. Earlier only multinational companies or companies who had representative from multinationals asked for this coverage but now due to the above reasons local companies are also keen to know and seek this coverage.
The presumption of a less litigious environment in Saudi Arabia and the Middle-East, has not made this product as popular as it is in America and Europe. Regionally the market penetration of this product in Saudi Arabia is low as compared to UAE but as mentioned earlier this could change in the coming years.
S.G.Afzal Biya Bani: How is the General insurance market in Saudi Arabia, is it different from others?
Syed Siddiq: The General Insurance market in Saudi Arabia is one of the largest in the Middle East with Gross written premiums touching SR 14 billion annually which constitutes about 45% of the total GWP in Saudi Arabia. Motor constitutes 50% of the General Insurance business which is primarily dominated by the mandatory TPL insurance for vehicles.
Apart from Motor, Property and Engineering are the next major lines. The good thing about the Saudi Arabian market is that in a very short period of time we have become one of the most regulated markets in the region and the credit for this should go to the regulator SAMA for enforcing reforms in the sector and for achieving so much in such a short span of time.
The strict regulations have brought some sort of order in the market and unhealthy practices to a large extent have been curtailed. The reforms are still continuing and slowly the regulator SAMA is looking to streamline other General Insurance lines like Property and liability which will further improve the market.
As compared to other regional markets, the prices are still by and large healthy even though the market seems to have softened as compared to the prices prevalent about a decade ago. There is fair sense of competition in the market but capacities in major lines are lower than what one would expect and these lines are heavily dependent on Reinsurance.
High loss ratios in some lines have hardened the reinsurance market a bit over the past one year and we can now notice the effects of the same.
S.G.Afzal Biya Bani: How do you see the insurance industry progressing over the next 3 years?
Syed Siddiq: The Saudi Economy is expected to show an annual growth of 5% in the coming years. However the Insurance industry has grown around 20% annually year on year in terms of GPW for the past 3 years. It is my opinion that in line with the growth of the economy and coupled by the expected increase in Insurance penetration, I would expect that the Saudi Insurance sector would continue to grow in the range of 15% to 20% year on year.
In terms of quality, I anticipate more regulations in the non-mandatory lines, which will ensure risks are properly evaluated before being insured; as well as there will be improvement in the technical expertise across all insurance companies.
S.G.Afzal Biya Bani: How was the financial results of the insurance companies in Saudi Arabia in 2014 and did they make underwriting profits?
Syed Siddiq: The financial results of most insurance companies in Saudi Arabia in 2014 were positive. 23 out of 35 Insurance companies declared Net positive Income, this was good and encouraging considering that only 16 companies had net positive income in 2013. However, one of the factors that we could attribute this outcome could be due to reversing of reserves which were made at the end to 2013.
S.G. Afzal Biya Bani: What is the level of specialization in insurance skills expected in this industry?
Syed Siddiq: This is a very good question. Insurance is a vast area covering a wide range of specializations. When we talk about technical specialization we can classify the requirements into two a) Basic Educational Qualifications b) Insurance Exposure. For technical disciplines Graduation in a particular field is a must.
Candidates with Engineering degrees can look at Risk Engineering, Property and Engineering underwriting. Commerce and Finance Graduates can look to enter Financial Lines etc. That being said, it is very important to have insurance related education in terms of either professional qualification from CII in London or Insurance Institute of India or from other Insurance Institutes.
These professional qualifications help the candidates get access to technical, market and regulatory knowledge and prepare them to be a part of the insurance industry. In terms of skill sets candidates should develop sound analytical and computation skills which are essential to be successful in the technical discipline.
Talking about the Saudi Arabian insurance market there is a growing need of qualified and technically competent insurance professionals. Hence there are a lot of opportunities in this sector if one is qualified and competent.
S.G. Afzal Biya Bani: How do you feel working as an Insurer and what are the real challenges?
Syed Siddiq: Honestly speaking, it is a great feeling working as an Insurer in this market. It gives me a lot of satisfaction as we get to learn something new every day. Insurance is such a vast area that even after years of experience, we feel that we have a lot to learn in this field.
Challenges are thrown at us every day as no two risks are the same and we try to find optimal solutions for each one of them. This gives us the drive to come to work every day expecting something new to happen on the work front. These challenges are the motivation for us to excel in our line of work.
S.G.AfzalBiya Bani: Thank you very much for your valuable insight on insurance subject and your experience and knowledge of the local insurance sector is also most impressive. I would like to thank you once again for coming here.
Syed Siddiq: Thank you! Mr. Afzal Biya Bani. It was nice talking to you, I too had a great time being with you this afternoon. I wish you and all our readers Seasonal Greetings.
