In his opening speech at the 8th Middle East Insurance Forum 2012 (MEIF 2012) Abdul Rahman Mohammed Al Baker, Executive Director Financial Institutions Supervision said the event was an opportunity for the insurance industry to meet and exchange views on current market and economic conditions that have direct impact in our insurance markets.
“Titled “Building a Platform for Progress – Key Developments to Ensure a Stable and Thriving Regional Insurance Market” become relevant and timely as the insurance industry in the MENA region is undergoing transformation and there is a tremendous potential for the regional insurance market to grow and thrive,” he said.
“The macroeconomic trends of the emerging markets like India, China, Russia, Brazil as well as the Middle East will continue to grow. As a result, the current demand for sound conduct of business and transparency, as well as the enhancement of policyholders and shareholders confidence, create the need for strong and sound regulatory infrastructure for insurance industry globally and in the MENA region, greater now than ever before,” Al Baker explained.
“The global financial crisis provides us an opportunity to address the weaknesses in the financial system and to build a platform for development and growth of the insurance industry. The regulators all over the world, especially in the MENA region need to strengthen their regulatory framework so that the industry could capitalize on the growth opportunities. The financial crisis has been a reminder that markets need effective regulation if they are to operate properly.
The CBB, Al Baker said, always believes in continual enhancement and improvement of its regulatory infrastructure for the growth and betterment of industry. Currently, we are working on the Takaful module in order to further enhance the growth of the Takaful industry and to ensure that all the stakeholders are protected.
“It is also expected that the changes to the module will attract new players to the market and will foster competition for the betterment of the consumers.”
“The CBB has introduced new rules on client money, which basically aims to enhance the regulatory framework relating to the appointed representatives and insurance brokers. The new rule will further strengthen the role that the CBB is undertaking towards protecting clients money from being utilized in other than the purpose outlined in insurance contracts.
“In order to recognize the achievement of the insurance industry, CBB in collaboration with Bahrain Insurance Association (BIA) is planning to hold an “Insurance Day” towards the end of March.
From a regulatory perspective, he added, the CBB has taken various steps to ensure that a stable insurance market continues to strive and prosper in our region. One of the main regulatory priorities that a regulator should address is the protection of the policyholders. This objective has been clearly outlined in the CBB Law as well as through the rules that have been introduced to specifically deal with tied agents. These rules require a minimum level of qualifications for those dealing with potential policyholders and recognize that the offering of insurance products must be made in a professional and ethical manner. In this regard, the CBB will also be introducing the “Training and Competency” requirements for insurance licensees and their staff performing controlled functions, as well as those involved in dealing with potential customers.
“Maintaining adequate level of solvency that is in line with the best regulatory standards is another regulatory priority for the regulators in the Middle East insurance industry. Such solvency requirements should be helpful to provide early warning to regulators so that they could take the necessary measures should the capital of insurance firm falls below the required level. Adequate solvency requirements basically enhance the confidence in the financial stability of the insurance industry and further improve the financial standing of insurance firms,” he said.
“Regulatory bodies in the Middle East should also prioritize other objectives to sustain growth in insurance markets. They should encourage the building of talent base and strive to enhance universities and private training centers to offer multiple insurance degrees and certificates to accommodate the needs of students and professionals and to target a wider range of individuals interested in pursuing insurance studies. This will guarantee the necessary supply of highly qualified talented personnel to meet the growing demands of the market and regulatory authorities in the region.”
As far as Takaful is concerned, he said, there is a need to implement takaful specific accounting best practices in all MENA countries to ensure transparency and protect stakeholders’ interests.
“Looking ahead, we see great new and untapped potential for insurance industry in the coming years. According to the latest report published in December 2011 with respect the infrastructure projects in the GCC countries, the GCC is set to invest more than $960 billion in 1,638 new projects over the next decade. Over 80% of these projects are construction, infrastructures and petroleum industry related projects. For new roads and railway projects alone, the GCC countries will be spending a total of $97 billion between 2011 and 2020. All of these projects are expected to produce a lot of insurance and reinsurance business to the insurance companies in the region, and the region as a whole is likely to benefit from them,” Al Baker added.
“Last but not least, regulators in the MENA region should closely work together to develop a regional insurance market through harmonizing legal frameworks and ensure that supervisory standards are on a par with best international standards. In this regard, the
CBB has played an important role in the founding of the Arab Forum of Insurance Regulatory Commissions (AFIRC), which brings together 17 Middle East regulatory authorities, and aims to promote collaboration, transparency and adoption of the best international standards among regulators in the region.”
“With Middle East insurance industry to grow throughout the coming years, regulators will have to act locally, and internationally. Locally by working closely with insurance companies, service providers and other industry stakeholders to ensure a close oversight of their activities yet provide enough room for them to grow. And internationally by coordinating and cooperating with standard-setting bodies like IAIS and other regional regulatory bodies to further enhance the regulatory and supervisory standards.”