Yolla El Khoury, Vice President of the conglomerate ACE Holding W.L.L. brings long years of experience and sound leadership to Momentous.
Known as one of the famous woman business leaders, El Khoury has held many different positions with agents, brokers and insurance companies, including working for (BIBF) Bahrain Institute for Banking and Finance. She has handled worldwide projects and she comes from a business family where her father founded Cumberland Insurance & Reinsurance sal. where she is a board member. El Khoury is recognized as one of the most trusted professionals in the industry and she was a featured speaker in various events. Considered an expert in her field, she has been attracted to join ACE Holding W.L.L.
BL: Why market sentiment remains upbeat among reinsurers and brokers operating in the countries of the Gulf Cooperation Council (GCC)?
El Khoury: Despite the world economic crisis the countries of the Gulf Cooperation Council have shown steady growth. In all of the GCC market the insurance premium has shown steady increase year after year and in some countries the growth was in double digits. In all of the GCC markets insurance penetration is still at a very low level and the potential for that to increase and the market to grow remains big. For reinsurers and brokers a good economy that is growing will always present opportunities to grow business.
BL: Does the GCC remain an attractive high growth, low-catastrophe market? Why?
El Khoury: The absence of major natural catastrophe exposures continues to attract reinsurers to the region and despite the Global warming and the change in climate, the GCC region did not as yet experience any natural catastrophe of a magnitude that would cause a dent in insurers’ bottom line to make a difference.
BL: The global insurance market continued firming in Q3. Do renewal rates point to market stabilization in the absence of major losses?
El Khoury: Despite the losses that occurred we see more that more capital is committed to the insurance market than we had a year ago. This puts pressure on the ability to increase rates which remains flat. The current renewal season for other than loss making accounts are for the most cases renewing at a flat rate and at times with a reduction.
BL: Why did the demand for Director’s & Officers liability insurance increase during the economic downturn?
El Khoury: With the public listing of numerous conglomerates in the region there has been an increased demand for Directors and Officers liability at the time of IPO and then later after successful listings. With economic downturn Directors and Officers of publicly listed companies would be more exposed to public scrutiny and questioning. In economic downturns, legal cases by public shareholders against directors for extra ordinary losses, bad management, wrong decision or misleading information etc. would increase and that makes the need of the insurance cover more apparent.
BL: Do you agree that there is a growing demand for Political Risk, SRCC and Trade Credit insurance? Why?
El Khoury: The Growing demand for both Political risks and Trade credit in a region that is seeing political unrest is obvious. Foreign investors would need to protect their investments against a wide range of political related perils which include exposures such as withdrawal of license, confiscation and others,in addition to the possible physical damage to the assets by the perils.
SRCC rates are directly related to the political status and security of nations. Usually with uprisings and what we are observing in the Arab World such political changes are accompanied by instability and security issues. It is only natural that when the risk is higher the rates will increase in anticipation to higher frequency of such claims. Therefore, corporates demand is increasing due to the exposure of SRCC risks.
Trade credit insurance acts as a stimulus to the trading activities of any country. At times of economic downturns traders would need to extend credit to overseas suppliers to sell their products. Without insurance protection exporters run a high risk of default which they cannot handle without some sort of insurance. This is why in areas where there is no private insurance governments have stepped in to assist to provide insurance protection to protect the exports of their nations products.
BL: Whe economic and social turmoil risk is reversing the gains of globalization?
El Khoury: Globalization and the rule of large numbers that come with it is a double edge sword. For many years Global organizations benefited from the growing economies outside their own countries. With growth the more the spread of the operation and activity of the organization the more the profit. With economic and social turmoil the reverse is true. The larger the spread of the organization the more exposed it would be to the negative impacts of the downturn in economy. With what is happening in Europe it became more apparent that globalization can be as devastating if not more, as at an earlier stage it was rewarding. To take a recent example, Organizations in the US and the Far East were badly hit and suffered huge losses as a result of the economic crisis in Greece & Spain.
BL: With the continuous demand of expertise and its lack in the region, what is ACE doing to keep up with the challenge?
El Khoury: Our most valuable asset is our people. We continuously train, develop and nurture top quality and highly motivated professionals who share ethical standards and are dedicated to the fulfillment of ACE's mission. This coupled with a high retention level of employees, enables ACE deliver consistent and steady quality service to clients which ACE competitors cannot match. We at ACE conduct internal and external training. Periodical internal training is focused on specific areas of our business, and to cover the group service standards, ethical behavior in addition to various technical subjects that include claims handling, complex insurance programs etc. While external training relates to a broader range of topics such as advanced negotiation skills, customer service, Anti money laundry and various specialized technical subjects. Usually third party professionals are involved in the external training. Most recently, we conducted an advanced negotiation skills course with Scottworkfor the senior executives within the group in Abu Dhabi.
BL: Why experts are stressing the need to take effective steps to regulate the medical and vehicle insurance market as several insurance companies in the Kingdom are struggling for survival?
El Khoury: Medical and motor insurance premium represent respectively around 53% & 23% of the Saudi market premium. With both classes constituting around 75% of the total market premium, makes both classes of business the target of all insurers. Yes there has been war price amongst insurers to gain as much market share as that may be possible and the aggressive approach negatively impacted the results of insurers. Putting aside the price war, both classes and in particular medicalrequire a large number of employees to service and in view of the scarcity of trained employees, many insurers portfolio outgrew the available resources which worsened the situation.
No insurer can afford to continue losing so insurers with losses had to do a complete review of their approach as they were under pressure from shareholders and regulators. This is why we started seeing a reverse in the trend of losses and many insurers returned to profitability during 2012. At the same time the regulators are putting pressure as they requested all insurers to present actuarial assessment of the motor and medical rating structure to support profitability. This exercise by itself would set rates at the levels it should be to ensure profitable results and is bound to benefit the entire market.
BL: Plans for a new nuclear power plant in Jordan have stimulated competition, Does Ace have any plans in this regards?
El Khoury: The research team at ACE has been working thoroughly investigating the recent interest of countries in the region to develop nuclear power plants.The outcome was encouraging when we discovered that more than one Arab country is interested in developing nuclear power plants. Being part of a leading broking firm in the region, we decided to give the subject our attention and to develop within the group a division that will be headed by myself to able to handle such mega projects. I am currently preparing my fellowship plan in the chartered insurance institute centered arround nuclear power plant in insurer’s perspective.
BL: What is the Impact of large losses in the global power industry? Do you agree that if large claims continue to blight the power industry with the same frequency that has been observed over the past decade, insurers' appetite for writing power business is likely to change (claims totaling $1.2 billion were attributed to breakdowns in turbines, transformers and generators alone)?
El Khoury: With the impact of large losses in the power industry, insurers results are negatively affected Underwriters have concerns over the power industry in the areas of aging transformers, less robust new equipment, aging civil works, and manpower reduced technical knowledge in the absence of succession plans. With increased power demand old power plant and equipment continue to run at full capacity. No investment is being made to replace old equipment which in many cases are allowed to run until they fail. Power underwriters are attempting to reduce their exposure to old equipment but that is not practical or possible in most case. The general malaise in the world's financial markets is also not helping underwriters' results as investment income cannot make up the gap in underwriting results as may have previously been the case.
To improve underwriting results underwriters are 1) increasing deductibles to decrease losses and/or 2) increasing premiums. Underwriters focus thus far has been more on the latter, but where losses have occurred underwriter are now pushing for a full and proper review of client retentions, replacement values, and restricting cover on old equipment
BL: What is unique in ACE’s set-up as a broking firm?
El Khoury: Having 20 offices spread in 8 different countries offers great opportunities to grow the business by cross selling and servicing of clients between the various ACE offices. ACE is able to attract major Corporates with operations in more than one country where we or our network partners are present.
ACE has been chosen as the regional partner by three of the large brokers’ network. This means that major brokers operating in other countries, such as Europe or the states, would trust ACE to handle the business of their international clients in the region. This by itself is a testimony that ACE possesses a high level of professionalism and has experienced resources to handle and service major business in the region. At the same time the partners’ networks give ACE access to overseas offices and resources to service regional clients with International operations.
BL: What type of insurance programs or projects do you handle and what is the most recent ?
El Khoury: ACE provides the full range of professional services to government, semi government, major corporates, large and mega projects, small and medium size business. The services include providing advisory services, designing and implementing insurance and risk management programs, contracts review and administration, selection of securities and the placement of direct insurance and reinsurance placements.
The Bulk of our business comes from the insurance of industrial assets and projects. The values involved are huge and would add to Billions of U S Dollars. To give an example the property program of one of our loyal clients includes assets with value of around SAR 100 Billion.
We are proud that ACE was appointed the local insurance broker of the largest and first IWPP project in the region; ACE also handled and placed several of the major power and petrochemical plants in the GCC region. The most recent projects currently handled by ACE include a $ 2.5 refinery project in Kuwait and the SR14 B rail road project in KSA.
ACE has in-house resources capable of handling lenders driven projects including the designing and placement of the related complex insurance programs, which most of the local brokers would not be able to handle without involving outside resources.
BL: What are ACE’s expansion plans?
El Khoury: ACE plans include strengthening existing operations and starting new ones. During the current year, we have invested in developing and enhancing the resources of our offices in the UAE. We also succeeded in securing a new license in Oman and the branch there started its operation last September. Our next target is to establish an office in Qatar during the first part of 2013. The group has interest to expand into other Arab countries to complete its network of broking offices.
