Al Wathba National Insurance Company P.S.J.C. (AWNIC) was recently awarded a rating of BBB+ Outlook Stable from Standard & Poor’s Rating services which serve as a recognition of the company’s achievement and track record during the years since its establishment in 1996.
From there, the company has grown year after year to close its books in the year 2014 with a total gross written premium of AED 427.183 million, net underwriting profit of AED 17,573 million, total profit of AED 109,052 million and shareholder’s equity of AED 872,615 million.
AWNIC’s presence is very much visible in UAE market, being a well-known name; and for many considered as the company of choice when it comes to insurance requirements. AWNIC constantly evolves and reinvents its products and services to effectively provide the needs the various market segments.
Nowadays, the first thing that is visible to clients is the Customer Care Centre that was established mainly to be the focal point of all personal lines insurance which can be also be purchased online or through the toll number. Through the CCC, AWNIC has effectively expanded its reach for all its clients from any Emirate wherever in the UAE. AWNIC has also opened its doors to various educational institutions to educate and train their students on insurance related matters as well as to provide work experience and insight on an insurance related career path for their future professional development.
Today, in a market that is impacted by severe competition and price war among the 60+ insurance companies operating in the UAE, AWNIC continues to uphold the essence of insurance by being technically sound, and driven by the serious analysis of the performance of the market and the company itself to arrive at a proper evaluation of the risks it covers.
Given the above, it is important to know that behind the success of AWNIC there is hard work and far vision exerted by Bassam Adib Chilmeran and his distinguished team. Chilmeran is the Chief Operating Officer of Al Wathba National Insurance Company– United Arab Emirates. He joined the company in the year 2000 and before that he worked for the Arab Insurance Group (ARIG) since 1989. He also serves under the following entities: Founder and Board Member of Vision Insurance Company- Muscat, Founder and Board Member of Ur International Insurance Company - Iraq, Chairman of the Reinsurance Committee of the Emirates Insurance Association since 2003, Member of the Technical Committee of the Arab War Risk Syndicate “AWRIS” since 2006, Chairman of the Technical Committee of the Gulf Insurance Federation “GIF” since 2003, Member of the Insurance Working Group of the Abu Dhabi Chamber of Commerce since 2008. Bassam Chilmeran is a holder of a BSc. Degree in Economics and Master Degree in Business Administration and is an associated of the Chartered Insurance Institute of London.
BL: Chilmeran, today you are celebrating your 15th year in the UAE and with Al Wathba National Insurance Company, how do you see the market evolving from then to what it is today?
Bassam A. Chilmeran: My involvement in the UAE market started way before I joined Al Wathba National Insurance Company. It goes back to the days when I had worked in ARIG (Arab Insurance Group), Bahrain as an account executive for the UAE market; it was from there that my relation with the insurance companies had started.
I perceived the UAE market as very upbeat as I used to view the UAE as a fast developing country with a very vibrant insurance sector. Year after year the market developed to the level where it is today, being the largest in the Arab world with a premium income for 2014 of AED33.5b (US$912m) of which 75% is non-life and 25% is Life (as per the Insurance Authority 2014 Annual Report).
With the fast paced growth, we have witnessed the emergence of the most successful reinsurance hub in the region which is based in DIFC, Dubai. DIFC plays host to first class international re/insurance companies and brokers providing sizable capacity accompanied by exceptional level of service and has also succeeded in bringing internationally renowned insurance specialist, Lloyds of London.
I consider it a privilege to have the opportunity to work in such a sophisticated insurance market as the UAE’s.
BL: In 15 years and since you have joined Al Wathba, how do you evaluate the position of the company in the market then and now and what are the future plans you have for the company to take it forwards?
Bassam A. Chilmeran: I have taken over the management of the company from a very fine gentleman, Aziz Jassani who was instrumental in the establishment of Al Wathba by laying the foundation of the company.
From the first day that I have assumed the company’s helm, I had ensured that I have the right people around me and formed a cohesive team, together, we were successful in setting the path and the plans for the company with the objective of being known for our professionalism and positive contribution in the insurance market both locally and regionally.
Today, I can proudly say that with the team’s support, Al Wathba is recognized as a major player in the market and as an insurance company that provides first class services to its clients.
BL: Recently Al Wathba National Insurance Company was awarded the rating of “BBB+” Stable by Standard and Poor’s this is in itself is a major recognition of the company, how did the company achieve this and why did you seek to get the rating?
Bassam A. Chilmeran: The rating of Standard and Poor’s is both recognition for the company and an indication of its capital strength. We are among the few who have sought a rating specifically from a top reputable rating agency. It was very important key step taken by the management at this stage to obtain a rating which will reflect the level of quality and professionalism at which the company conducts its business. This rating also gives our clients the confidence and comfort of knowing that they are backed by company that is as solid as its rating implies and that is able to fulfill its obligations when needed.
BL: By the time of this interview is published the listed insurance companies would have published their results, what are your expectations and how do you relate this to the results already announced in the second quarter and what are your expectation for the year end 2015?
Bassam A. Chilmeran: Looking at the results of the insurance companies up to the second quarter shows that the market is still under the momentum of growth since a number of companies have shown an increase in premium.
Although there are some exceptional companies that declared excellent technical results, the quarter however was unprecedented in terms of the number of companies that declared negative results either in technical or investment or on both. This is very much unfortunate, because being the largest market with limited exposure to catastrophic events; companies should be able to achieve positive returns for shareholders.
On further examination of the UAE market’s annual report as published by the Insurance Authority we see negative development in the results of some of the main classes. Analysis of these figures shows that there is an evident deficiency in the pricing of these classes which eventually impacts the operating insurance companies.
BL: The insurance market is regulated by the Insurance Authority which is established not that long ago, what role do you see them playing and do you foresee any intervention in bringing the market back to basics?
Bassam A. Chilmeran: Today’s market is driven by a severe level of competition, sadly up to the extent where a growing number of operating companies have declared negative technical results, among which some have now depleted their equity beyond the minimum requirement set by the Insurance Authority.
Personally, I do not see any of the current regulations putting guidance on the technical underwriting of the insurance companies nor does it set accountability for the negative performance which is mainly driven by competition and non-technicality. It is because of these factors that I cannot foresee any positive influence that can bring such competition to certain senses. The market is in need of a serious set of regulations that can simultaneously govern the insurance sector and regulate the members of the industry.
Now if you ask me how do I see the future? Today I see the Insurance Authority taking big strides as they have been actively working in setting the regulations which will soon be fully enforced. The Insurance Authority has also set the mechanism to ensure proper compliance with the regulations. Now we need to see the level of compliance, followed by the level of monitoring and eventually the enforcement of the regulations to see how successful we can be.
I personally, am an advocate and a supporter of the Insurance Authority and am confident that they will also play an active role similarly to that of the Central Bank of the UAE in the manner they regulate the banking sector.
If the Central Bank determines the Emirates Inter Bank Offered Rate (EIBOR) which sets the rate under which the banks determine the lending interest rate and then set the lending capacity of the bank based on the bank equity then the Insurance Authority should also set minimum rate for any class of business or at least the main ones particularly the loss making business to ensure that the market does not go beyond what is sensible competition and eventually jeopardizing the interest of the company’s shareholders as well the policy holders.
Further, the Insurance Authority should follow the steps of the Central bank by imposing what is known as a premium cap by linking the ability of writing the business to the financial strength of the company which is determined by its solvency.
Another thing worth mentioning on this issue is for those against a bigger role for the authority and those who are calling for a free market. I would refer them to the action taken by the US Government where an intervention was made to support various sectors in the US economy during the financial crisis up to the extent where financial support was extended to prevent the collapse of an insurance company.
BL: We have seen the world economy thriving after the financial crises and the region have enjoyed till recently a $100 for the oil, now the price of oil is below $50 how do you see this impacting the insurance industry?
Bassam A. Chilmeran: Although oil has been the mainstay of the UAE economy and continues to contribute significantly to economic prosperity, a determined and far-seeing policy of economic diversification has ensured that non-oil sectors now account for 69% of GDP, with oil sectors comprising the remaining 31%.
From 2008 till recently, we have witnessed a steady growth in the economy as well as the local financial markets where many listed companies have announced exceptional results. During this period the UAE had actively worked in building a sound infrastructure which is now considered among the best in the world.
As of late, the UAE has the most sought after carriers; Emirates Airlines and Etihad, its Dubai Port manages and handles a large portfolio of terminals across the world, the hotel and tourism industry has made the UAE the number one destination of choice for tourists, the UAE’s construction and real estate sectors are among the most developed in the region, the insurance sector is among the largest in the Arab region and its banking sector is notably among the most advanced worldwide.
Oil has contributed in financing this growth and the current level of oil prices will definitely have an impact, but to a point that can be manageable till the oil prices go up again which is expected to be soon.
On the insurance side, yes I believe there will be an impact due to the unstable insurance market that is already suffering from competition. There will also be other elements that will affect the market such as the shortage of liquidity and eventually in such times the implementation of new regulations will further impede the ailing insurance companies by the imposition of the solvency margins and new reserve requirements.
BL: Motor and Health being the main classes of insurance, how are these two classes performing in the UAE and how is Al Wathba positioned in writing these two classes?
Bassam A. Chilmeran: As mentioned earlier, when we look at the market statistics published by the Insurance Authority on both fronts with Health on one side and motor on the other with both motor comprehensive and third party, results are not appealing at all.
Insurance companies whom are indulging in severe competition need to take bird’s eye view of the situation arising from the current market circumstances and seriously need to reconsider their position. I expect the Insurance Authority to take a more active role in questioning those who are making losses from underwriting.
On the other hand, the scenario on the Health side is more aggravated as this class of business has driven a number of companies to the edge of the cliff and even beyond.
Al Wathba has been a serious player in both these markets, and has been to a certain extent affected by the competition, but today we have taken a conscious decision to further strengthen our underwriting tools and intelligence system and have taken a more conservative approach in business that does not yield positive returns to the company. We consider ourselves members of a respectable profession that is rich with culture and supported by science, we will respect that and continue follow that science to ensure that we are able to service and preserve the best interests of both our clients and shareholders.
BL: What are expectations for 2016 and how does the present political turbulence in the Middle East impact the UAE’s insurance and reinsurance market?
Bassam A. Chilmeran: It is difficult to discuss about the insurance market beyond 2016 without looking at the current scenario in the region which is growing more and more desperate with the political and security issues plaguing neighboring countries. However at the same time, I look at the UAE and still see a glimmer of hope and feel optimistic in knowing that with positive will, the right leadership and the right people, miracles can happen and turn things around.
I view the UAE with optimism in 2016 and expect the market which is driven by its economic diversity to continue to generate growth in all sectors and eventually stimulate the insurance business. I further state that once the insurance regulations are fully enforced that this will help regulate the market and enforce further stability within the insurance market.
BL: What would be the challenges facing the insurance market and Al Wathba?
Bassam A. Chilmeran: The main challenge is for the market to rise above and beyond; whether collectively or individually and have a positive contribution to themselves and the industry at large.
I expect that once main regulations are implemented on solvency margins, capital adequacy, reserves, and other provisions that a number of companies will face certain issues which will make compliance difficult. This will require the Insurance Authority to play an active role in monitoring and enforcing these regulations and at the same time to provide support to the companies to aid them in overcoming this curtail period.
Al Wathba views the coming year with optimism. We have set the plans to improve the underwriting returns and profitability and are setting the pace to be well-equipped to better service our clients.
We have also constantly endeavored to ensure that we provide an ideal the work environment for members of the team thereby enhancing productivity.
BL: You have established Vision Insurance Company in Oman and Ur International Insurance Company in Iraq and now serving on the board of both companies, how do you see the operation of these two companies?
Bassam A. Chilmeran: On both counts, and looking at how far both these organization have grown, I feel very proud to say that I have personally, with the assistance of a number of friends and colleagues, have built these operations brick by brick. Today, both are considered as major players in their respective markets and are doing well as planned for them.
