Top 10 target for ambitious Qatar Re

When it came to deciding where to domicile the revamped Qatar Re business there was only ever one conclusion: Bermuda. So says Gunther Saacke, the company’s chief executive officer. He says that while he took time to look at the parade ring of other runners and riders, in truth he couldn’t see further than the market leader.

“Yes, we had a look at all the other jurisdictions and did a thorough analysis of them all but we quickly came to the conclusion that Bermuda was the place to be,” says Saacke.

A key driver in that decision was the fact that Qatar Re has targeted growth in North American casualty market as the driver that will continue to propel it towards its ambition to become a global top 10 “modern re/insurer”.

The company currently has no exposure in the US casualty market and only a small book of casualty business elsewhere, mostly concentrated around motor. This is set to change with the firm poised to attack the ‘heavier end’ of this market segment. The decision to domicile Qatar Re in Bermuda with its close proximity to the US will help make this a deliverable strategy.

“The close proximity to the US market—the biggest and most important in the world—was a big factor for us. It will help us attract key personnel,” says Saacke.

“We were also impressed by the well-respected regulator and the commitment to the European markets with the move towards ‘equivalence’ with the European Solvency II requirements, which is very much welcome. In that sense it became a necessity for us to obtain regulatory status here. We are very excited about the move.”

Advancement based on analytics

Qatar Re will extend its underwriting capacity on the Island by utilising existing Lloyd’s managing agent Antares, which is Bermuda-based and was bought by parent company QIC Group last year. The combined firms’ head count is currently only in single figures, but this is expected to quickly advance into double figures early next year.

If all the necessary regulatory hurdles are cleared, the new re/insurer on the Bermuda block will bring a respected, innovative and well-capitalised presence with the ability to quickly move into its target markets.

A refusal to compromise on cost, allied with a tightly managed portfolio and a focus on analytics, is expected to spark strong initial growth for the Doha-headquartered parent’s global multi-line insurer.

It’s a philosophy that has already delivered, despite operating in a market characterised by oversupply and subsequent rate reductions. Qatar Re posted healthy half-year figures, which showed its gross written premium income rocket by 42 percent to $463.6 million from $326.7 million in the same period last year. Gross underwriting income over the same period was $40.4 million against $28.1 million for the same period in 2014.

“A combination of class intimacy, proximity to our business partners and an uncompromised focus on the disciplines of managing and controlling risk forms the bedrock of our successful development,” adds Saacke.

“We are probably the shape to things to come in terms of our portfolio and what a ‘normal’ insurance company will look like in the future.”

Those future firms would be characterised by a disciplined portfolio, a focus on offering technical expertise and building relationships with ‘insurance entrepreneurs’ and working constructively with their broker partners.

Adopting this strategy leads to a path to growth that will “effectively defy the adverse trends in what has become a notoriously deteriorating soft market,” Saacke claims.

At the same time, Saacke has struggled to see the rationale behind the recent merger mania terming it an “erratic roaming” of the available strategic options.

“In a market where everybody is doing everything it’s a very difficult environment. We have struggled to see the clear rationale behind the market tracking portfolio and these firms buying each other to create a larger market tracking portfolio. Sometimes one fails to see the efficiencies of scale being translated into positive profit and loss figures,” he says.

“Anticipating the challenges of the future, we have abstained from moving into those areas where the future curve is taking the industry—we have a different space. We have chosen to grow the company in a different way.”

Head above the sand

Saacke believes that the current market environment, typified by a lack of major events in recent years, is disguising the real picture of many re/insurers. When the inevitable major event does happen many players will see pressure come from all angles.

This has resulted in major players in the market questioning the position they hold and revising their strategy in the light of other market players doing the same.

“There is hardly anyone that is not considering moving into Lloyd’s or alternative capital or not considering doing niches or some sort of speciality lines—what else is there?” he asks.

“The interesting thing is the return on investment—it’s relatively low and you wonder if it makes more sense to take your money to the savings bank. There must be more to it. We continue to try and achieve much better.

“Qatar Re is about being better than average and that has very much to do with the underwriting performance.”

The organisation is somewhat unusual in that it is set up as a traditional re/insurer yet has little or no cat exposure. Saacke says that this lack of dependency on a cat book is something that sets it apart.

“We are not a market tracker—that’s not our space. We are building a portfolio in a disciplined way alongside our theory of portfolio management. We are performing in a different market environment,” he says, “and we have continued to grow at quite some pace.”

Growth in the business is being fuelled by the ‘entrepreneurs’—so much so that today it represents about 30 percent of the book. That involves financing and backing strong industry ideas by providing pro-rata capacity.

Market advantage is gained through privileged access to a stream of business, or better knowledge of a certain class of business, or having a better product, or being very smart on the distribution side. It is these non-transactional, one-off opportunities that have seen Qatar Re grow as others have stood still or moved backwards.

Describing the insurance entrepreneur as a “major source of growth” Saacke adds: “We have been able to get involved with people we have known for a long time and do special projects with them. We provide pro-rata capacity to grow into something more substantial. We make the market more efficient and become part of it. At the same time we are very often fulfilling the personal franchise of these underwriting teams.”

New entrepreneurial clients represent nearly $80 million worth of new business (by gross written premium) in the past year. “Growth in a tough market would worry me if I didn’t understand where the growth came from. We are about one-off opportunities,” adds Saacke.

Deep understanding

The combination of analytics with strong business relationships seems to be serving Qatar Re well.

“We take into the book only risk that we understand and that we can price for correctly. We want to work in tandem with partners to find the best way to work together in a smart and sustainable way and at the same time keep our eyes open for new opportunities—particularly in the US and in East Africa, where we see long-term growth possibilities,” says Saacke.

“The vision is to grow ourselves to become a meaningful operation of some size. We want to be a very successful reinsurer for our clients—that is the strongest indication of security.

“We want to be a very profitable organisation. We want to be top 10 and we have made some good progress towards that so far.”

To help realise that ambition the company is also about to move into a new branch office in Dubai to complement its Singapore operation and has plans to open a London office in the near future. Through the parent, QIC Group, Qatar Re also has access to a primary licence in Malta.

Says Saacke: “We are now truly a global player.” Who could argue with that?