Qatar Re View

ISSUE 1 / 2014

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EDITORIAL

Dear Readers

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elcome to Qatar Re’s newly branded newsletter Qatar Re View! Together with our new name and brand, we have given our newsletter a face lift and refreshed its look and feel.

We hope that you like it and enjoy even more reading about our company’s developments and views.

Over the course of the past 18 months Qatar Re underwent a fundamental transformation. Qatar Re’s CEO Gunther Saacke leads you through the journey on how Qatar Re’s new brand reflects this transition. Further in this issue, Nabih Massaad, Head of Qatar Re’s Doha Operations & Head of FAC Engineering, shares with you his thoughts on the opportunities and challenges for (re) insurers of large commercial risks in Qatar. Mark Cockroft, our Chief Actuary, talked to Qatar Re View about the company’s commitment to the highest standards in risk management.

Also, you are invited to learn more about our new Bermuda office, its team, strategy and business portfolio as well as Dr Karl Schneider’s presentation at the first Asian Aquaculture & Risk Management Conference in Hong Kong.

Finally, don’t miss the introduction of four recent senior appointments: Andrew Deighton, new Global Head of Claims, Michael Roth, new Head of International Property Cat and Head of Branch Zurich, Marc Tueller, newly appointed Head of Agriculture and Dr Karl Schneider who has become Senior Member of the Qatar Re Advisory Group.

As always, we look forward to receiving your feedback.

Your Qatar Re View editorial team

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VIEW FROM THE TOP Gunther Saacke, CEO Qatar Re

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N 29 APRIL 2014 WE REVEALED OUR NEW brand and logo, Qatar Re. The rebranding not only reflects the sea-change the Company has undergone in the past 18 months. It is also a promise for the future.

Let’s first take a look back to understand what prompted us to adopt a new brand: At the beginning of 2013, Q-Re embarked on its transition from a regional reinsurer focusing on the Middle East and Afro-Asian markets towards a global franchise, with a physical presence in major international reinsurance hubs.

We have made significant progress on that journey. Today, Qatar Re writes business across most property, casualty and specialty lines. Besides our head office in Doha, we now have branch offices in Zurich and Bermuda. From our locations we reach out to cedants across the globe, addressing very different needs: From Doha, we write business in the Middle East, Africa and parts of Asia. In Europe, we serve primary insurance clients, who are looking for multiline solutions and reliable, long-lasting relationships. In the UK, as well as supporting the traditional Company Insurance Market located in that territory, we cater for clients domiciled in Gibraltar and Malta who accept primarily UK based policyholders whilst also using the necessary specialist expertise to support the needs of clients from the London market including Lloyd’s. In Bermuda, we focus on the origination of catastrophe and aggregate business, but also provide cover on a per-risk or on a pro-rata basis. I think it is fair to say that we have made enormous progress in becoming a recognized global franchise, with significant potential for further expansion.

and the acquisition of the Lloyd’s syndicate Antares, QIC Group has demonstrated its determination to pursue a systematic strategy of internationalisation. Complemented by the existing commercial insurance platform of QIC International, the Group is now in a position to offer a wide variety of risk transfer options. In sum, we can pull out almost as many stops as many of our larger and far more established competitors based in the London market, Continental Europe or Bermuda.

I think it goes without saying that our brand reflects this quantum leap. Following discussions within our Company, with our Board of Directors as well as with a number of clients, we decided in favour of Qatar Re. What sets us apart in the global marketplace are our origins in the Middle East, namely our distinct and strong capital base (rated “A/Stable” from S&P and “A/Excellent” from AM Best), which is uncorrelated with the global financial markets and thereby offers immediate diversification benefits to our clients.

In addition, our new brand emphasizes that we are the first reinsurer from the emerging markets, who pursues a systematic strategy of global expansion. It is our approach with which we execute this strategy that sets us apart. In contrast to other aspiring emerging markets-based reinsures, Qatar Re is diversifying abroad from the onset, rather than first building a domestic franchise.

THE NEW BRAND emphasizes that we are a reinsurer which pursues a strategy of global expansion

Not only our markets and product offerings have changed.

The old Q-Re was a follower by definition. Business was mainly written to diversify against the QIC Group business it reinsured. In sharp contrast, today, we are in a position to provide lead quotations for each and every business offered to us. These capabilities are based on our significant speciality underwriting expertise in combination with state-of-the art systems and processes required to support our growing business.

In the meantime, we have re-underwritten Q-Re’s former book of business, shed unprofitable business and expanded our footprint in profitable areas. Our total book of business has grown substantially as has Qatar Re’s staff – from about 30 in late 2012 to more than 90 today.

Finally, the new Qatar Re also reflects major changes at our parent company, QIC Group. With Qatar Re’s expansion

The Qatar Re brand reinforces our association with QIC Group, one of the highest rated insurers in the Arab world. Founded in 1964, QIC has become the largest insurance company in the Arab region by premium income, profitability and capitalisation. Listed on the Qatar Exchange, QIC has a current market capitalisation in excess of USD 3.4 billion. QIC is not only the source of our capital. It also supports us with its expertise, in particular its widely respected investment and financial management capabilities.

The new brand underpins our aspirations, which have remained unchanged. Over the next 10 years, we aspire to develop into a leading global reinsurer with a strong presence in all key reinsurance markets. Qatar Re stands for a corporate culture, which is diverse, respectful and globally minded. We pursue an entrepreneurial approach, which is based on a drive for innovation. Over time we want our brand to be associated with in-depth technical expertise, front-end underwriting authority, a strong client focus and superior risk management. n A lso see the interview with our Chief Actuary Mark Cockroft in this edition

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INTRODUCING

Mark Cockroft Chief Actuary of Qatar Re

ENTERPRISE Risk Management lies at the core of Qatar Re’s strategy...

Mark Cockroft has almost 20 years of experience in general insurance actuarial work, primarily gathered at London market and international reinsurance operations such as GE Frankona and Endurance.

He has covered pricing, reserving and capital modelling for a variety of lines of business and firms.

Mark also managed teams of actuaries. As well as publishing on pricing for long-tail reinsurance, he most recently chaired the Institute of Actuaries working party researching the effects of Periodic Payment Orders (PPOs) in the UK. Mark holds a BA Hons (2:1) degree in Mathematics from the University of Oxford. He is based in Doha, Qatar.

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ATAR RE IS COMMITTED TO THE highest standards in risk management with a Chief Actuary who reports to the CEO and is a Member of the Executive Committee. Qatar Re View spoke to Mark Cockroft.

Mark, how would you describe Qatar Re’s risk management philosophy?

Enterprise Risk Management (ERM) lies at the core of Qatar Re’s and the entire QIC Group’s approach to risk. The respective framework rests on the three pillars of capital management, exposure management and risk management and allows for an integrated approach to insurance, operations, credit, market, liquidity, management, and compliance risk.

What are the key regulatory drivers of your ERM regime?

Of course, regulatory developments have significantly gained in relevance over the past few years. In Europe, the Solvency II process has been influencing the industry’s risk management practices for more than 10 years. The financial crisis of 2007 and 2008 has further added to regulatory scrutiny – see for example the recent comments in The Times newspaper by Mark Carney, the Governor of the Bank of England. We at Qatar Re are regulated by

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the Qatar Financial Centre Regulatory Authority (QFCRA) which is committed to state-of-the-art risk-based solvency and comprehensive risk management and disclosure requirements as defined by the International Association of Insurance Supervisors (IAIS).

decisions. Another example is the development of Qatar Re’s internal capital model which is nearing completion. This tool will greatly enhance decision-making across our value chain.

Can you keep pace with these increased requirements?

For the time being, our main focus is on the ‘Own Risk and Solvency Assessment’ (ORSA), a core element of future regulatory environments, not just under the upcoming Solvency II regime in the European Union but also in the United States and other parts of the world. Under the ORSA, we will set out our own view of the risks we are facing now and will face in the future, and the capital required to meet those risks. Our regulator, the QFCRA expects us to file the ORSA as from next year, ahead of the European Union. Again, it is important to stress that the ORSA is not supposed to be a document manufactured just for the regulator but a key reporting element embedded in our internal decisionmaking processes. Qatar Re’s ORSA and its internal reporting to the Board will be like two sides of the same coin.

First of all, as an aspiring global reinsurance company we have to and we will! But let me make one thing absolutely clear: We are committed to first-rate risk management practices because we feel that these are an indispensable precondition for our long-term commercial success. For example, capital management based on a sophisticated internal model enables us to take better pricing and product development decisions. It goes far beyond regulatory compliance and is part of our business planning DNA. How do you embed Qatar Re’s risk management philosophy in key decision-making processes?

There are two important governance-related aspects to this: On the one hand, we have implemented a Group ERM process and established a dedicated Risk Committee which is chaired by QIC’s Group Head of ERM, a role comparable to that of a Chief Risk Officer. This committee liaises with risk owners in the organisation who manage risk and reward trade-offs in their day-to-day jobs. On the other hand, the risk management executives at Qatar Re regularly report to the Board and have direct access to its members who can therefore make risk-informed longer-term strategic

What is currently your biggest challenge?

Specifically how can you use ORSA for your business planning and strategy development?

Our ORSA report will describe how we quantify and manage risk under stressed conditions—and how we translate these findings in our capital management processes and priorities.

In addition, the report will furnish prospective solvency assessments. As such, the ORSA will be no less than the foundation for medium-term business planning and longerterm strategy development.

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LARGE COMMERCIAL RISKS IN QATAR Nabih Massaad Head of Doha operations & FAC Engineering

The opportunities and challenges for (re)insurers

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OR THE PAST FEW YEARS, QATAR HAS BEEN RANKING among the world’s fastest growing economies.

Real annual average GDP growth from 2007 to 2012 came in at almost 14%, three times the MENA average and four times the global average.

Declining penetration despite strong premium growth Qatar’s economic momentum has translated into strong insurance market growth, averaging 10% after inflation from 2007 to 2012.

However, premium growth trailed GDP growth. As a result, nonlife insurance penetration (premiums as a share of GDP) in Qatar decreased from 1.0% to 0.7% during that period of time. One reason for the insurance industry’s inability to keep pace with the economy’s break-neck expansion is price competition which has naturally depressed premium volumes, as compared with levels of exposure.

Another reason is the limited importance of personal lines such as motor and health insurance in Qatar. These lines of business have proven to be growth drivers in other countries such as Saudi Arabia.

US$ 270 billion of projects planned or under way Infrastructure and construction investments continue to be a major driver of insurance and reinsurance demand in the region in general and in Qatar in particular where the value of projects planned or underway reaches US$ 270 billion, according to MEED. Most of these

OUTLOOK: Further pressure on margins may result from a relaxation of national insurers’ exclusive access to large risks...

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projects are government funded and serve the purpose of long-term economic diversification away from the hydrocarbon sector. Major infrastructure projects include a new deep-water sea port, a transport corridor in Doha, new roads, bridges, tunnels, upgrades of the transport sector, including new rail and metro systems and obviously also new stadia in preparation for the 2022 FIFA World Cup. Therefore, the share of insurance premiums related to Qatar’s energy and petrochemical market is set to decline, from a current 50% of the total. Premiums from construction and transportation projects in particular are expected to grow fastest in the commercial lines space.

property damage arising out of these operations.

As far as CAR risks are concerned, local hazards are limited to flash flooding, particularly on road construction, pipe-laying or foundation works. Claims are relatively small by international comparison. More recently, damage to underground pipes and cables has caused some losses, as available maps are frequently out of date and pipes and cables have moved in areas of reclaimed land. Another exposure is occasional winter storms. Some market participants still remember the 1977 winter storm affecting the Umm Said LNG plant and causing insured losses of US$ 100 million, the world’s largest CAR loss by then.

Engineering (re)insurance in Qatar

Outlook and conclusions

In light of the construction boom in Qatar, market observers expect an increasing need for facultative reinsurance in general and engineering cover in particular. Most standard products are available in Qatar.

Construction All Risks (CAR) insurance covers damage to property, such as damage to buildings being constructed or to existing buildings in which construction work is being carried out. In addition, CAR covers liability for third party claims for injury and death or damage to third party property.

Erection All Risks (EAR) policies address the risk of loss arising out of the erection and installation of machinery, plant and steel structures, including physical damage to the contract works, equipment and machinery, and liability for third-party bodily injury or

Overall, the growth prospects for large risk (re)insurance in the Middle East, and in Qatar in particular, remain attractive even though rates are widely considered as having fallen to below technical level.

Further pressure on margins may result from a relaxation of national insurers’ exclusive access to large risks, i.e. a market opening for foreign insurers. Under such a scenario, brokers are expected to gain in importance, adding further to competitive pressure. Against this backdrop, Qatar’s large risks market might become even more of a buyer’s market. To counter this development, insurers and reinsurers should step up their game and identify, develop and offer innovative and tailored solutions which effectively protect the risk owner’s balance sheet and P&L.

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AQUACULTURE Dr Karl Schneider Senior Member of the Qatar Re Advisory Group

Making a splash

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N MAY 13, 2014 DR KARL Schneider, Qatar Re’s former Head of Agriculture, was a key note speaker at the very first Asian Aquaculture & Risk Management Conference 2014 in Hong Kong.

Asia is the largest region for farming aquatic organisms i.e. fish, seafood, and aquatic plants etc., with a total production believed to exceed 69 million tons, which is 90% of the global market for farmed fish.

However, on the insurance side, Asia is still very much underdeveloped, especially compared with Europe, Chile, North America and Australia. Approximately 90% of global premiums come from the traditional markets and only the remaining 10% from Asia. Thus, there is a huge potential. The most important insured risks are mortality due to disease, storm and wind damage, as well as algae bloom, also related to climate change.

At the conference there was a general

ASIA is the largest region for farming aquatic organisms... consensus that Asia is the powerhouse of aquaculture as it is growing at a rapid rate and leads the rest of the world in the volume and value of its output, in the number and variety of the species grown, and in the variety of the growing systems it uses.

Karl Schneider’s presentation ‘Historic Underwriting Experience, Reinsurance Market Experience’ highlighted the history and role of aquaculture reinsurance since its beginnings, its profit margins’ developments and lessons learnt over time as concentration on the production side is expected to increase going

forward. It also demostrated the challenges the Asian aquaculture market is facing as intensity increases on the production side going forward.

In his address, he stated: “China has, for centuries, been the largest producer of farmed fish. In addition, we also expect growth in aquaculture farming in other parts of Asia and thus in aquaculture reinsurance in that region.

There will be new risks from new species and technologies which will require insurance, and we hope to support our clients in these new developments.”

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QATAR RE’S BERMUDA BRANCH MOVED INTO NEW OFFICE

A COMMON understanding of cedants’ risks and its underwriting processes are key objectives...

NEW BRANCH

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N 1 JUNE 2014 Qatar Re moved into its new branch office in Bermuda. It is located at 106 Pitts Bay Road in Pembroke, Bermuda.

The Qatar Re Bermuda branch is headed

by Luke Roden, Branch Manager and Head of North America Property. Rob Lee Womack serves as Underwriting Manager North America Property. The underwriters, who bring to the table more than 50 years of reinsurance experience, are in charge of building Qatar Re’s property lines business in North America including Catastrophe, Risk XL, Aggregate XL, Pro-rata and Stop Loss.

Through its Bermuda branch, Qatar Re offers a capacity of up to USD30 million per Catastrophe/Aggregate and USD7.5 million for Per Risk/Pro-Rata. The majority of the firm’s North American business is written through

the broker market. Decisions are taken quickly because the firm’s senior underwriters are vested with a clear frontend authority and benefit from a flat decision-making structure.

Qatar Re only started underwriting with a blank sheet of North American exposures quite recently. However, due to its good broker relations, the firm’s underwriters have been able to rapidly build up a sizeable portfolio for their Bermuda branch. Maintaining close client relations and establishing a common understanding of cedants’ risks and its underwriting processes are key objectives for the team.

Qatar Re looks forward to meeting all existing and future clients at its new office in Pembroke, Bermuda. Over the next few months, the branch office will increase its staff. Bermuda is supported by Qatar Re’s global network of offices, allowing for a six-day working week.

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IN THE NEWS

Andrew Deighton Head of Global Claims

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N MAY 2014, QATAR RE ANNOUNCED THE APPOINTMENT of Andrew Deighton as its Global Head of Claims.

Andrew Deighton has a strong legal background, being qualified as a barrister and solicitor in the UK, and as an Advocate in Jersey, UK. Andrew has been active in insurance and reinsurance since starting in London in 1986.

He moved to Zurich in 2000 to become transactional counsel for Zurich Re (later Converium), supporting underwriting and claims across the business. Most recently, Andrew worked in Jersey, UK, serving as in-house counsel.

Andrew Deighton will drive the establishment of a first-rate global claims organisation. It is Qatar Re’s objective to pay all legitimate claims within a few working days. Committed to the global reinsurance market this ability will form an integral part of Qatar Re’s value proposition.

Michael Roth

Head of International Property & Head of Zurich Branch

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T THE SAME TIME, MICHAEL ROTH WAS appointed Head of International Property Catastrophe and Head of the Zurich branch, effective May 1, 2014. He has over 12 years of experience in the reinsurance and financial industry. Michael started his career as a futures trader, before he moved to Munich Re to become an agricultural underwriter. In the following years Michael held senior underwriting positions at Swiss Re, Novae Re and Qatar Re, where he was instrumental to the acquisition and development of the agricultural portfolio of each company.

Michael holds a master degree in agricultural economics from Munich and Madrid Technical University.

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Marc Tueller Head of Agriculture

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N ADDITION, MARC TUELLER WAS appointed Head of Agriculture, effective June 1, 2014. He has been in the agricultural reinsurance industry for more than 14 years. Marc started his career as underwriter with Swiss Re where he was responsible for various markets in Europe and Asia, and later became Head Agriculture for the Americas. He then moved to Novae Re and Qatar Re where he has held senior underwriting positions. Marc holds a master degree in agronomy from the Swiss Federal Institute of Technology (ETH). Prior to joining the reinsurance industry, he worked for several years on projects in development cooperation.

Marc Tueller succeeds Dr Karl Schneider who was appointed Senior Member of the Qatar Re Advisory Group and will continue supporting Marc with the further build-up of the agricultural portfolio. As a Senior Advisor, Karl will take on a broadened role dedicated to strengthening Qatar Re’s franchise globally and well beyond the space of agricultural lines.

Gunther Saacke, CEO of Qatar Re, was delighted with the appointments and that the Company was able to fill two senior positions from within the organisation. Marc’s and Michael’s promotions testify to the depth and breadth of Qatar Re’s internal talent base. Gunther’s gratitude also goes to Karl for his outstanding contributions and the leadership he has provided in building the agricultural lines practice at Qatar Re.

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Qatar Re View Doha Q-Re LLC, 8th Floor, QIC Building Tamin Street, West Bay Area PO Box 24938, Doha, Qatar Tel.: + 974 449 94 777

Zurich Q-Re LLC Doha, Zurich Branch Bleicherweg 72, 8002 Zurich Switzerland Tel.: + 41 44 207 8585

Bermuda

London

Qatar Reinsurance Company LLC “Overbay”, 106 Pitts Bay Road, Pembroke, HM08 Bermuda

Q-Re LLC, Representative Office, Suite 2/10, London Underwriting Centre, 3 Minster Court, Mincing Lane London, UK, EC3R 7DD

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