The Dubai International Financial Centre (DIFC) aims to grow the number of re/insurance firms operating within the Centre to 100 within the next two to three years. Already, seven of the top ten reinsurers in the world have established operations in the Centre. Lloyd’s of London has recently indicated its intention to establish a presence, on the back of growing Syndicate demand, in the DIFC. The rise of Dubai as a reinsurance hub for the MENA region matches Singapore’s growth as a hub for the Asian market. These hubs now offer the capacity to underwrite all but the largest and most complex risks, without reinsurance buyers having to travel to the more established centres.
What do these emerging reinsurance hubs, strategically positioned to provide access to many emerging markets, have to offer? How will the emergence of these hubs impact the traditional worldwide powerhouses for the reinsurance of global risks, which have traditionally been centred in established and historical financial centres such as London, Paris, Munich and Zurich, or newer centres such as Bermuda and Dublin. The traditional centres boast a concentration of capital, technical expertise and first-world business standards.
The emerging reinsurance hubs offer a number of advantages:
- Proximity to emerging markets which offer encouraging growth prospects. The ability for international reinsurers to have a business presence close to these new markets will allow reinsurers to understand the local markets better and build local knowledge regarding the underlying risks
- Enhancing customer service by having local offices, operating in local time zones
- Developing regional skills that are targeted at the emerging markets through regional staff who deal with local markets on a day to day basis
- Promoting the development of localised wordings that are fit for purpose in the local context. This will avoid the all too common phenomenon of international wordings being used to underwrite local business without being adapted to fit the local context
- A business-friendly approach within a sophisticated regulatory operating environment. The frameworks created by Singapore and the DIFC are world-class, and are backed up by sophisticated regulators and judicial/ arbitration frameworks
- The ability to streamline and enhance the distribution process through interaction with and continuing development of local brokers and intermediaries
It is clear from the pattern emerging from hubs such as Dubai and Singapore, that the hubs are not replacing the established centres. Rather, they are serving to extend the global reach of the market players based in those hubs. Most of the entities established in the new hubs are still managed from London, Zurich etc, and are reliant on technical support from those centres. However, we can increasingly expect to see regional management centres being developed in these hubs as business grows.
The trend towards international reinsurers setting up regional operations in emerging hubs like Singapore and Dubai seems well-established. The significance of these regional hubs will increase alongside the development of the emerging markets which they service. In the long run, this can only bode well for the growth of a truly global industry.