International team with an international presence:Fenchurch Faris Ltd. group photoBy striking a balance between caution and calculated risk and adhering to the fundamental principles of the insurance profession, insurance & reinsurance broker, Fenchurch Faris Ltd., have managed to weather the political and economic storms that have often lashed the Middle East insurance market.
The company has benefited from increased demand for political risk insurance in the Arab region and is eyeing further expansion in that direction. They are also gearing up to make a noticeable footprint in the energy market with the help of their international partners. Fenchurch Faris is also focusing more on training of highly proficient insurance professionals.
Rafat Faris, the eldest son of the company’s founder and the company’s Executive Committee Chairman, told BUSINESS LIFE that while some of their competitors have admittedly been around for significantly less time and have since grown at a faster rate, his company’s growth and development is progressing exactly as planned. The company plans to open new branches in Saudi Arabia and the UAE, and in the long term it’s looking to Africa and Kazakhstan for possible new opportunities. Today, everyone talks about insurers need to change. But at Fenchurch Faris Ltd. both the management and its dynamic team have been redefining insurance needs for decades. Fenchurch Faris is famed of their business model which has been built over on long-term client relationships, developed over many years by genuinely understanding and responding to client need by offering unbiased advice and being transparent, reliable and prudent. Fenchurch Faris Ltd. marks its 30th anniversary this year. It was established in 1984 as a joint venture between Basim Faris and the Fenchurch Group in London, a major Lloyd’s broker. The aim was to combine Arab expertise with Lloyd’s broking professionalism.
The company is no stranger to the Arab insurance market that is often plagued by political, security and economic turbulences. Despite this, Fenchurch Faris Ltd. has continued to plow a straight furrow towards continued success, overcoming a myriad of challenges from the unremitting soft market to the challenges posed by social and political upheavals.Today, Fenchurch Faris Ltd. employs over one hundred people in five countries in the Eastern Mediterranean and Arabian Gulf. It counts among its shareholders and longtime partners ‘Arthur J Gallagher’, the fourth largest insurance broker in the world and a Lloyds broker, among other regional commercial players. The company currently services clients in over 25 countries across three continents. Rafat Faris joined the company in 2005. He is a chartered member of the Insurance Institute of Canada, having achieved the designation of Chartered Insurance Professional (C.I.P.) in 2004. He began his insurance career 15 years ago at Heath Lambert, a Lloyd’s broker in London. He went on to work in the Special Risks Department at Marsh Canada and later worked in the Property & TPL Department at Aon in Toronto. He did not enter the insurance industry by accident. He and his brother, Zayd Faris, comprise the third generation of their family’s link to the Middle East insurance market, beginning with their great uncle, Basim Faris, one of the founders of Arabia Insurance Company, which was originally established in the 1940’s. Rafat Faris’ role in developing and executing the company’s strategic objectives provides us with a good opportunity to gauge his thoughts about the insurance industry today and further down the road.
BL: As a medium sized broker, Fenchurch Faris has made a name for itself in a market with a multitude of often larger brokerage firms, how did you do it?
Rafat B. Faris: We have strong conviction in the drivers of our success. We have an unblemished reputation among both suppliers and those demanding insurance capacity and I would attribute this mostly to the cautious personality of our founder and the corporate culture which he shaped. We have never been known as the broker that ‘never says no’ nor have we ever sought such a distinction. However, Fenchurch Faris continues to differentiate itself in small, medium and sizeable projects alike, counting some of the region’s most recognizable companies as shareholders and joint venture partners. We have been in the business for 30 years, 28 of which have been growth years. We believe that our longevity has always depended upon our performance, which in turn relies upon our transparency and our reluctance to compromise our core values.
BL: Where do you see future growth opportunities?
Rafat B. Faris: At this point in time, reinsurance comprises almost 70% of our overall revenue. We intend to increase our focus on and investment in the retail sector by establishing additional retail branches in more territories. Another area where we see potential for growth is on the treaty side of the business. For this reason, we have recently enlarged our treaty department by employing more treaty experts and diverting more resources towards securing and handling treaty reinsurance. We have also seen our Political Risk portfolio expand and we are making more resources available in that direction. Finally, we are gearing up with strong international partners to make a noticeable footprint in the Energy market. The presence of Arthur J. Gallagher on our board of directors and as a shareholder in our company will no doubt assist us in this endeavor.
BL: To what extent were the insurance markets of the MENA region affected by the upheavals in several regional countries?
Rafat B. Faris: Many businesses were not insured against political exposures when the turmoil began. In some countries, like Egypt, even the existence of political risk insurance did not spare insurers and their clients from the disputes which arose over whether the proximate cause of a particular loss was S&T (“Sabotage & Terrorism) or WSRCC (War, Strikes, Riots and Civil Commotion). In many markets, as general insurance rates continued to decline, rates for political violence covers increased significantly. We have reaped the benefits of the latter trend, since Political Risks insurance happens to be one of our strengths. At the same time, there is also the added challenge posed by countries under international sanctions, like Syria, as most international reinsurers and many local treaties were subsequently unable to offer their capacities due to the existence of sanctions clauses on most policies. One cautiously hopeful development pertains to Iran, which has been ravaged by international sanctions over the past few years. There has been a substantial thaw recently in Iran’s acrimonious relationship with the West and this may create new opportunities for regional insurance brokers.
BL: What can emerging market policymakers learn from mistakes made in more mature markets?
Rafat B. Faris: They can begin by relying more on technical underwriting than on investment income, which would help maintain healthy premiums. They should note that even insurance titans in the Middle East and abroad have been humbled by fool-hardy strategies and policies. One need only look at the prevalence of underwriting losses in many of our markets and their substantial effects ultimately on net profit. Emerging market policy makers should also be proactive in increasing their retentions, thereby increasing their revenues and, ultimately, their credit ratings. Many insurance companies in mature markets tend to function more like risk transfer vehicles in the hope that they will escape detrimental loss records. However, they inevitably miss out on healthy premiums when maintaining very low retentions, both in facultative and treaty business.
BL: What can you tell us about developments at the company and its progress in recent years?
Rafat B. Faris: Many of our recent successes have been on the products side of the business. Thanks to the tenacity of several of our managers and their strong relationships with reinsurance underwriters across the globe, Fenchurch Faris offers facilities and binders across the product spectrum, particularly for specialist classes. We have also addressed recent challenges in the insurance sector by concentrating increasingly on Human Resources. We are placing greater emphasis on the employment of experienced insurance specialists as we delve deeper into the energy insurance market in the Middle East and Africa. We have also increased the scope and depth of our internal training program, which is geared towards the principles & practices of insurance. In addition, we have injected more incentives to encourage more of our employees to complete their ACII studies and we are seeing this endeavour bear fruit. This is complemented by our encouragement of staff members to attend seminars abroad that are relevant to their areas of specialization, thereby increasing the company’s in-house expertise and the employee’s professional self development. We have also initiated a program, at our main office in Athens, which conducts educational seminars to managerial staff working at insurance companies or in the insurance departments of commercial enterprises throughout the region. These seminars will include guest speakers and focus on specialty lines and current market conditions.
BL: Is there one particular factor that defines the insurance market in the MENA region today?
Rafat B. Faris: We have noticed that the ultimate buyers of insurance in the region are much more aware today of the multitude of options that they have before them. This has both positive and negative repercussions for an insurance broker. On the positive side, the insured is more educated on insurance issues and we consider this a good thing since this will lead to a higher penetration of insurance in the MENA region. On the other hand, the loyalty factor is at an all time low as buyers of insurance often cannot help but canvass the markets through a multitude of brokers for ever-falling premiums. This strategy may look great on paper, however, in the long term, buyers of insurance may miss out on the advantages of long term agreements and other rewards that come from a steady, ongoing relationship. Not to mention that reinsurers tend to lose enthusiasm for such market-saturating risks.
BL: What are your plans for 2014 and for the future?
Rafat B. Faris: We plan to open an office in Al Khobar in Saudi Arabia in the next few months after which we will divert our attention to Jeddah. We are very pleased with the performance of our Saudi office in Riyadh, which was established in 2011 as a joint venture with Olayan Finance Company. Likewise, following the successes of our Abu Dhabi office over the past few years, we have applied for a license to establish a Dubai branch, which we expect to be operational later this year. On a more long term basis, our company has been studying the viability of establishing broking offices in both Arab and non-Arab countries in Africa. Kazakhstan is also currently on our radar as a possibly promising opportunity. We believe that through our experience the recipe for the success of such enterprises will entail the establishment of joint ventures with local commercial and/or industrial companies in the countries in question.
BL: What does the future hold for the broking profession?
Rafat B. Faris: I believe that our profession will play a more vital role in the insurance industry going forward. In the past, insurance brokers have helped customers to make intelligent insurance decisions and contributed to increased industry transparency and the stimulation of competition in the marketplace. Brokers have also used their bargaining power to elevate the buyer of insurance to be on a more symmetric footing with the seller of insurance. The importance of this role will continue into the future. However, the insurance broker of the future should be equipped to deal with the challenges that come with new technologies, increased political risk exposures, rising insurance penetration and an ever expanding demand for energy insurance in the Middle East and Africa. Hence, the future of the broker, to a large degree, lies in risk management and consulting. in addition to purely broking activities.
BL: What do you believe will be the main trends or “game changers” affecting the MENA insurance sector in the years to come?
Rafat B. Faris: The most likely assumption is that the insurance landscape will slowly but surely converge towards best practices found in the more developed western markets. Retail insurance will almost certainly become a direct internet play, while commercial lines will adopt more sophisticated approaches to risk management and transfer, such as captive arrangements. Local legislation will follow in tow promoting a higher degree of professionalism and transparency.
